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Domestic rating agency ICRA in its latest report has said that the slower deposit growth will push banks to mop-up up to Rs 1.3 lakh crore from bond issuances in FY25. The bond issuances, coming amidst a continuing wedge between deposit and credit growth, will come between Rs 1.2-1.3 lakh crore and will be the highest ever for the system. It said nearly 85 per cent of the bond issuances will be by public sector banks and added that the higher appetite for infra bonds among such lenders will drive the market.

According to the report, tight liquidity conditions and credit growth continuously surpassing deposit growth has necessitated fundraising by banks from alternate sources. Banks had raised Rs 1 lakh crore from the bond issuances avenue in FY24, while the previous all-time high was reached in FY23 at Rs 1.1 lakh crore. With the mid-fiscal year mark approaching, it said banks have already raised Rs 76,700 crore from bonds till now, which is an over 225 per cent growth over the resources mobilised during the same period in FY24. 

The report said as private banks are focusing on reducing their credit-to-deposit ratio, fundraising through bonds is largely being dominated by public banks this year. Infra-bond issuances have seen higher volumes due to the government of India's focus on infrastructure spending, availability of a sizable infrastructure loan book that is eligible to be funded through this instrument and strong demand from insurance companies and provident funds for long-term issuances.