Gross bond issuances by banks increased to ₹90,000 crore in the nine months ending in December 2022 against ₹70,000 crore in FY22. They rose past the earlier high of ₹80,000 crore in fiscal 2017, as they scrambled to close the gap between credit and deposit growth, reported Business Line, quoting ICRA data.
The credit rating agency expects overall gross bond issuances by banks to rise further to ₹1.31.4 lakh crore in FY23.
As credit demand picked up strongly in recent months, the overall gap between deposits and credit growth widened substantially. Incremental credit expansion stood at ₹12.7lakh crore in FY23 (till December 16, 2022), while deposit accretion continued to trail at ₹8.9 lakh crore.
“To bridge this gap (of ₹3.8 lakh crore), banks have been relying on various sources of funding such as refinance from All India Financial Institutions (AIFIs), drawdown of excess on balance sheet liquidity and debt capital market issuances. As a result, gross bond issuances by banks surged,” according to an assesement by ICRA.
“Over the last few months, banks have seen healthy credit growth but low deposit growth. So, there was requirement of capital. Most of the banks have shored up capital, assuming credit growth will continue,” said Ajay Manglunia, MD & Head, Investment Grade Group, JM Financial.
Aashay Choksey, Vice President and Sector Head, Financial Sector Ratings, ICRA, expects the credit-to-deposit ratio for the banking system to firm up to 76.376.5 per cent by March 2023 from 74.8 per cent (as on December 16, 2022) and stand considerably higher than the low of 69.6 per cent seen during the Covid19 pandemic.