On the back of a lower-than-expected credit offtake, bond issuance by banks in the third quarter dipped sharply.
According to data compiled by credit rating agency Icra, bond issuances dropped by almost 35 per cent in the third quarter after several quarters of brisk fund-raising.
Total bonds issuances by banks in the quarter stood at Rs 5,555 crore (lower Tier-II, upper Tier-II and perpetual bonds) against Rs 9,800 crore in the same quarter of the previous financial year, and Rs 8,600 crore in the second quarter of the current financial year, according to Icra. In the first quarter of the current financial year, bond issuances were to the tune of Rs 9,500 crore.
“Lower credit offtake coupled with comfortable capitalisation levels and wide differential between the short-term and long-term interest rates could also be a factor in lower bond issuances during the third quarter,” said Icra analyst Karthik Srinivasan.
Moreover, while banks such as State Bank of India, IDBI and Axis Bank came out with large bond issues in the third quarter of last year, they remained largely inactive in the same period of the current financial year.
Also, Axis Bank had raised bonds earlier in the year and went on to raise capital by way of a Global Depository Receipt (GDR) and qualified institutional placement (QIP) in the third quarter. HDFC Bank also raised funds through QIP in August. SBI too raised bonds earlier in the year.
“Credit offtake in the third quarter was almost at the same level as at the end of the second quarter. However, there could be some bond issues at the fag end of the fourth quarter, as credit offtake is likely to improve,” said VK Dhingra, executive director, UCO Bank.
More From This Section
Some of the large issuers of bonds and debentures during the third quarter of the current financial year were ICICI bank (Rs 1,250 crore), National Housing Bank (Rs 650 crore), Export and Import Bank of India (Rs 750 crore), Punjab National Bank (Rs 700 crore) IDBI Bank (Rs 630 crore), Bank of Baroda (Rs 300 crore), Oriental Bank of Commerce (Rs 300 crore), Bank of India (Rs 325 crore) and Allahabad Bank (Rs 650 crore)
“We could raise funds at a very competitive rate in the third quarter. After August, the coupon rate had shoot up to 8.80 per cent. However, we got the best rate, as we raised funds at 8.58 per cent in the third quarter,” said an executive of Allahabad Bank.
Public sector banks were also expecting a capital boost from the government in the fourth quarter, which could be one of the reasons for the slowdown in bond issuance, said a banker.