public sector banks According to the rating firm, unlike FY 2022, when they raised capital to meet their rollover requirements, this year is likely to raise additional Tier-1 (AT-1) capital to meet their business development requirements . The issuance of AT-I bonds is likely to come down to Rs 20,000 crore in FY2023, from an all-time high of around Rs 42,800 crore in the previous fiscal. In FY’2022.

The rating firm said most of the bonds in FY2017 that included a call option in the fifth year were driven by refinancing obligations of such issues issued in FY22. The net of new offers and redemptions between April and July 2022, the outstanding AT-I bonds as on July 31, 2022 were Rs. 1.02 lakh crore. Approx Rs. 20000 crores in anticipated issuances and estimated redemptions of around Rs 14700 crores during FY 2023, the outstanding AT-I bonds are expected to reach around Rs 1.1 lakh crore by March 31, 2023.

“public area banks AT-I Bonds are expected to raise Rs 20100 crore during FY2023, but are expected to remain modest based on private sector issue market opportunities” said Anil Gupta, Vice President, ICRA. “Unlike FY2022 “While the issuances were mostly driven by rollover requirements, those issued by public sector banks in FY2023 were primarily driven by growth requirements.”

Icra said investors’ appetite for AT-I bonds of public sector banks has been fueled by their better financial position and improvement in their ability to service them after offsetting the accumulated losses against their share premium account. The yields on AT-I bonds issued recently by public sector banks ranged from 8.0 to 8.75%, as against 7.25% on five-year government bonds and 7.55% on five-year AAA corporate bonds. Although the coupon on recently issued bonds is higher than the coupon on bonds issued in FY’2022, it is still lower than the rates on bonds issued earlier in FY2017 and FY’2018, the ratings firms said.