Indian banks could continue to actively raise funds via debt markets in the January-March quarter as they look to strengthen their capital base and finance credit demand under existing favourable market conditions, analysts and bankers said.
“Apart from credit growth and refinancing, the market condition is conducive, if you look at the long-term rates for bonds,” said Soumyajit Niyogi, director, core Analytical Group at India Ratings and Research. “So they are beefing up capital.”
Indian state-run and private banks raised an aggregate of ₹611.94 billion in October-December, more than double the ₹301.34 billion raised in July-September, according to data compiled by Reuters.
Banks are set to raise at least ₹300 billion in the January-March quarter, as they look to lock in funding in a tightening liquidity situation. Fundraising from banks so far in this fiscal has already crossed that of the previous year, when banks had raised ₹760 billion, according to data from Prime Database.
The lack of any major capital infusion from the government could also push state-run banks to go for market-based funding. “Banks have to be adequately funded and the government is not so keen on infusing further capital,” said Nagesh Chauhan, head of debt capital market at Tipsons Group.
“Most likely, major borrowings from banks will come in mid-February. Because by then, state-run banks would be aware how much capital is coming and what is the dividend they need to pay,” he added.
Private lender HDFC Bank has led the charge in recent months, raising an aggregate of ₹230 billion. India’s largest lender State Bank of India will, however, pip its rival before the end of this year, bankers said. SBI has raised an aggregate of ₹208.72 billion in July-December, and is set to raise ₹100 billion each through perpetual bonds as well as infrastructure bonds in the next quarter.
Other lenders like the Central Bank of India, UCO Bank and Punjab & Sind Bank will also issue bonds, while banks like Bank of Baroda and Punjab National Bank could complete their residual target. “All banks need capital as the Reserve Bank of India has been highlighting the fact that they want banks’ capital position to be strong,” said Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap. “There are high chances that lenders that have not yet tapped the market should come in with issuances.”