Overall, $17 billion of total debt raised in 2026 from India is on track to surpass the $22 billion garnered in 2021 – and dwarfs the $5 billion raised in 2025.
This week was the busiest for forex debt issuance by Indian lenders. ICICI Bank, Kotak Mahindra Bank, IDFC First Bank, HDFC Bank and Bank of Baroda together raised a massive $4.4 billion, and the bulk of the proceeds may be used to help fund the leverage for foreign currency non-resident (bank) [FCNR (B)] deposits.
FCNR-B deposits booked by August 31 qualify for the swap support.
HDFC Bank raised $1.75 billion Thursday, the largest by any Indian bank, in an issue that followed the $750 million the country’s most-valued lender had raised in June. IDFC First and BoB both upsized their previous issues adding $100 millon and $400 million, respectively, on Friday as banks continued to pile up the cash.
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Arup Rakshit, head, treasury, HDFC Bank, said the funds raised would underpin leverage to clients and also help fund customers abroad. “The amounts raised by the sector shows the strength of Indian banking,” Rakshit said.”The demand for our bonds is an endorsement for HDFC Bank’s credit quality,” he said.
Of the $12 billion raised by banks, $10 billion was garnered after the Reserve Bank of India (RBI) announced on June 5 the special dispensation for drawing deposits and other forex-inflow programmes.
Tight Spreads
But the apparent supply glut from India hasn’t come at a steep cost.
Vinod Venkatesh, co-head, financing solutions, HSBC India, said despite this heavy supply in a short span of time, spreads on Indian bank bonds are only around 5 basis points wider versus what they were at the beginning of the year and remain as tight as ever.
“Initial concerns around oversupply seem to have faded, as investors have focused more on the sector’s underlying credit strength, and many now see this as a rare window of opportunity to add exposure to the Indian banking sector,” Venkatesh said.
One basis point is a hundredth of a percentage point.
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Gaurav Bhagat, head of financial institutions, South Asia, MUFG, said despite the sudden surge in supplies, investors have responded favourably with deals getting oversubscribed on an average 2.89 times.
“Despite the volatility in US treasuries, all the deals have performed in the secondary market, leaving the international investors with an overall positive experience. This constructive market backdrop bodes well for issuers,” Bhagat said.
MUFG expects supply to continue, with an incremental $5 billion to $7.5 billion of issuance until the end of the year.
HSBC’s Venkatesh said that once the FCNR(B)-related concessional swap window closes, bond supply from the Indian banking space could drop materially, though activity will remain.
“Some borrowers that used short-term funding to utilise the window may return to the bond market later to refinance, so we expect select, need-based issuances through the rest of the year.
In addition, the other concessional swap window of 1.5% expires in December, which could also support further activity,” he said. “Finally, we could continue to see issuance from corporates and the NBFC space, which sits outside the two concessional swap windows.”