Money & Banking

Banks lured by record-low borrowing costs binge on bonds

Bloomberg Mumbai | Updated on February 17, 2020 Published on February 17, 2020

Rupee bond sales by Indian banks are off to the best start in five years as the lenders lured by record-low borrowing costs seek funds to bolster loans and capital buffers.

The banks have issued a total of ₹9,300 crore ($1.3 billion) of local-currency notes since January 1, according to Bloomberg-compiled data. That’s the highest amount at the start of a year since 2015 when they sold a record amount of bonds to meet Basel III requirements.

The nations prolonged credit crisis has investors, who are looking for alternatives to notes from loosely-regulated shadow lenders and riskier local companies, lapping up banks debt even as yields on it drop to lowest in at least 14 years. Falling borrowing costs and the spike in bond sales come as a relief to banks that are looking to strengthen their balance sheets and boost credit growth, according to rater ICRA Ltd.

On Monday, ICICI Bank sold ₹945 crore of 10-year bonds, according to a person familiar with the matter.

The surge in issuance by banks is partly fuelled by comparatively low-interest rates and reasonable liquidity in India compared to yesteryears, said Kamal Mahajan, head of treasury and global markets at Bank of Baroda. The record sales will help lenders meet their need for capital and asset-liability management for long-term assets.

Published on February 17, 2020
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