Credit flow to moderate, corporate bond issuances to rise in FY25: ICRA

Incremental credit flow in the Indian economy from domestic sources is expected to moderate to Rs 24.5 trillion in the ongoing financial year, according to a report by ICRA.

It was Rs 25.4 trillion in the previous financial year.

However, the corporate bond issuances are expected to rise by 9.9 per, the report said.

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The domestic rating agency said that corporate bond issuances are expected to touch Rs 10.6 trillion during the current financial year, against Rs 10.2 trillion in the previous year.

Non-food bank credit (NFBC) had reached record high in FY2024 as strong demand for loans from retail borrowers and non-bank finance companies (NBFCs) drove a significant portion of the incremental flow of credit from banks.

 

This resulted in the highest ever NFBC expansion of Rs 22.3 trillion in FY2024 far outpacing the incremental NFBC expansion of Rs 18.2 trillion recorded in FY2023, the report said.

The incremental credit flow was also supported by the all-time high corporate bond issuances of Rs 10.2 trillion during the previous financial year.

“ICRA expects the conditions for corporate bond issuances to remain conducive for both the issuers and the investors in FY2025, which is likely to drive the bond issuance to higher levels at Rs 10.6 trillion in FY2025 from Rs 10.2 trillion in FY2024. The corporate bond outstanding is likely to increase to Rs 50.3 trillion by end-March 2025, a YoY growth of 9.5%,” said Sachin Sachdeva, Vice President & Sector Head, ICRA said.

The report said that the recent regulatory measures targeting unsecured retail loans, alongside restrictions on bank funding for NBFCs and liquidity constraints within the banking sector, are poised to limit the incremental credit expansion by banks.

Nevertheless, the yield on Indian Government Bonds (IGBs) is expected to stabilise within a defined range, primarily influenced by increased demand from foreign portfolio investments following the inclusion of bonds in global indices. This trend is expected to enhance the attractiveness of financing through debt capital markets compared to traditional bank borrowing, consequently stimulating growth in corporate bond issuances.