‘In FY22, most of the funds raised through this channel were for refinancing of bonds done in FY17’
‘In FY22, most of the funds raised through this channel were for refinancing of bonds done in FY17’
ICRA Ratings said in the report that issuance of additional tier-1 (AT-1) bonds by banks is likely to exceed Rs 20,000 crore this fiscal, hitting an all-time high of Rs 42,800 crore raised in FY22. compared to the amount. monday.
AT-1 bonds are debt instruments that do not have an expiry date.
In FY22, most of the funds raised through the instrument were for refinancing bond issues done in FY17. Most bonds have a call option in the fifth year, resulting in a significant surge in new issuances that are basically to refinance earlier obligations.
In FY17, ₹32,100 crore was released to public sector banks and ₹10,900 crore to private sector lenders. ICRA said that in FY18, the amounts stood at ₹10,900 crore and ₹23,500 crore, respectively.
According to the report, lenders have already refinanced FY18 bonds due to lower interest rates in FY22.
In the first four months of FY23, lenders have raised ₹5,320 crore from the instrument.
The agency said as a net of new offerings and redemptions between April and July 2022, the outstanding AT-1 bonds as on July 31 stood at ₹1.02 lakh crore and is expected to touch ₹1.1 lakh crore by March 31, 2023.
Rating agency vice-chairman Anil Gupta said a major chunk of the newly released ₹20,100 crore would come from state-owned lenders to meet their growth aspirations, while private sector banks were “modest” based on market opportunities. Will be
On the demand side, driven by the better financial position of public sector banks, investors are now keen to bet on AT-1 bonds.
The yield on recently issued AT-1 bonds by public sector banks ranges from 8% to 8.75%, compared to 7.25% on five-year government bonds and 7.55% on five-year AAA corporate bonds, the agency said.