OPINION | India's Corporate Financing Shift: From bank loans to bonds

India’s corporate financing ecosystem has been steadily transforming.

India’s capital markets have come a long way from a system once reliant on traditional banking to one now offering a diverse and competitive financing toolkit. Risk appetite was limited, and young businesses, especially in asset-heavy sectors like real estate, had few options beyond term loans. But over the last two decades, India’s corporate financing ecosystem has been steadily transforming. The last quarter in India caught my eye: corporate bond issuances reached a four-year high, even as bank lending to corporates slowed across the board. We’re now standing at a crucial turning point where the capital stack is finally catching up with the country’s entrepreneurial ambition.

Mapping the Evolution

The journey of corporate financing in India can be broadly understood in three phases. Before we opened up our economy, corporate India relied heavily on bank loans. With the liberalisation of the 1990s, equity financing gained ground. Public listings, venture capital, and private equity became more visible and viable. However, while equity is valuable, it comes at the cost of dilution, something founders in capital-intensive industries can’t always afford.

The third phase marks the steady rise of corporate bonds. In Q1 FY25, corporate bond issuances reached a four-year high of ₹3.27 lakh crore. This came at a time when bank lending was in decline. The pricing is competitive, too. While banks currently lend at an average rate of 9.8%, bond issuances have seen rates ranging around 7.3%, depending on the issuer’s rating and tenure. For the first time, large businesses can raise long-term funds without traditional gatekeepers.

What This Means for Business

This shift matters because it changes how we think about risk, growth, and balance sheet strategy.

Take real estate as an example. It’s a sector that has long suffered from perception risk and regulatory churn. But today, stronger players with disciplined books can tap into new instruments such as listed NCDs, securitisation, and even private credit from global funds. This evolution is a direct result of a more discerning capital ecosystem. Investors are rewarding capital efficiency, clean governance, and project-level transparency. For us in real estate, this means that a well-audited, professionally governed platform can now raise funds at 150-200 basis points cheaper than a peer with weak disclosures or litigation baggage.

We’re also seeing new hybrids emerge, such as quasi-equity instruments, convertible debentures, and asset-backed securities tailored for cash-generating verticals. It’s no longer just about securing capital. It’s about securing the right capital that aligns with your risk, cycle, and cash profile.

The Business Shift: Risk is Now a Currency

We are entering an era where credibility is capital. The smarter businesses are reengineering themselves around this idea, building balance sheets that reflect both ambition and prudence.

As someone who started out as a Chartered Accountant and now leads a real estate development platform, I’ve seen this shift from both sides of the table. What I’ve learned is that capital chases clarity and track record.

What has changed is that investors are valuing predictability over potential. That means companies with stable cash flows, strong promoter reputation, and audited disclosures are attracting lower-cost debt. Financing is moving from relationship-driven to ratings-driven. A strong credit rating now does more than lower your interest rate. It signals maturity to everyone across the value chain, from JV partners to homebuyers. Business models are being built around flexibility. Structured finance options like lease rental discounting, project-specific SPVs, and warehousing finance are helping companies stay asset-light and liquid.

None of this means traditional capital is going away. Banks, equity, and family offices will continue to play critical roles. But the bar is rising. The businesses that will lead the next decade are the ones that treat capital not as a last-minute fix, but as a strategic lever

A Note to Founders

If there’s one lesson in all of this, it’s that India’s capital markets are evolving faster than most businesses realise. The tools exist. The appetite exists. What’s needed is alignment between business intent and financial discipline.

Whether you’re a startup founder, a mid-market builder, or a legacy business retooling for scale, now is the time to rethink how you fund your future. You don’t need to take on more risk to grow. You just need to learn how to price it right and then build a business that earns that price.

The wave is here. And for those who understand its current, it’s not just a moment. It’s a multiplier.

(By Ankur Aggarwal, Chairman and Founder of BNW Developments.)

Views are personal, and do not represent the stance of this publication.