Indian financial institutions have sold a record of almost $9 billion in dollar bonds this year, as lenders rush to capitalise on a central bank facility that lowers hedging costs on overseas borrowings.
raised $750 million from US-denominated debt on Monday, putting the 2026 total so far at $8.85 billion, according to data compiled by Bloomberg. The number has already topped the previous full-year record of $7.92 billion in 2019, and could rise further. has set an initial price guidance for a planned five-year dollar issuance and has hired advisers for another potential dollar bond offering, people familiar with the matter have said.
The deals have gathered pace since the Reserve Bank of India in early June announced the concessional foreign-exchange swap facility for banks and state-run firms to shore up a weakening rupee, boosting domestic liquidity and supporting credit growth. The special borrowing window is open until Dec. 31, prompting more lenders to accelerate their offerings.
The central bank had also set up a special window to attract foreign-currency deposits. It surprised traders on Friday by closing that facility a month ahead of schedule after the nation drew more than $50 billion from its citizens overseas. That led to a selloff in shorter-tenor India bonds as the premature closure means less rupee liquidity to support demand. There is no change in the deadline for the overseas borrowing facility for now.
“The recent surge in dollar bond issuance by Indian banks has primarily been to extend leverage to attract deposits from the nation’s overseas residents,” said Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings Inc.
Yap expects lenders to rush to the dollar bond market over the next few weeks after the RBI shut the deposit swap window early. “Post this near-term surge, issuance will likely taper off, as the aforementioned impetus will no longer be there and still elevated hedging costs make it uneconomical for banks to issue offshore,” Yap said.
About two-thirds of the dollar borrowings by Indian firms this year have come from financial institutions, showing how lenders are responding to the central bank’s efforts to boost capital inflows, after a tepid market earlier in the year due to high hedging costs. The facility offers a fixed annual rate of 1.5 per cent for an average maturity of at least three years, lower than current market costs.
The surge has spanned both private- and public-sector banks, according to Citigroup Inc. Strong global order books have allowed recent deals to price tighter than initial guidance, underscoring international investor appetite for exposure to Indian financial-sector credit, the US bank said.