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PSU banks dominated bond issuances in FY25, more Tier-II debt raise likely this fiscal

Private lenders have been totally absent from hybrid bond issuances in FY25. Despite favorable conditions for Tier-2 debt, these banks chose to rely on internal accruals and equity-driven capital planning.

August 01, 2025 / 16:33 IST
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Bonds

The bond market saw state-owned banks heavily raising funds through Tier-I and Tier-II bonds last fiscal while private lenders stayed almost completely absent from the segment, with experts projecting more such issuances by PSU lenders in FY26 as well.

According to Primedatabase, PSU banks raised Rs 47,690 crore through a combination of Tier-I and Tier-II bonds in FY25 as compared to just Rs 1,000 crore raised by private banks, and Rs 2,196.80 crore by small finance banks.

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In the PSU space, the largest issuance was by State Bank of India, at Rs 20,000 crore through Tier-II and AT1 bonds, followed by Bank of India at Rs 10,190 crore. Experts said the higher issuances by the state-owned banks shows the confidence of investors in the sovereign backing and stability of these banks.

“FY25 reaffirmed the dominant role of public sector banks in the hybrid capital segment of India’s bond market. While Tier-1 bond issuance was modest - estimated at around Rs 8,000 crore - the bulk of the activity was concentrated in Tier-2 bonds,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.