Indian lenders have achieved a remarkable milestone in 2026, raising $12 billion through US dollar bonds, with the latest week being the busiest for forex debt issuance by Indian banks. The fundraising began with a $750 million issuance from HDFC Bank, the largest private sector lender, and concluded with a $700 million cumulative fundraise by state-run Bank of Baroda through two instruments. With subsequent fundraises by IDFC First Bank and Kotak Mahindra Bank, the total is expected to have crossed $10 billion — a record high — as lenders capitalise on the concessional swap window operationalised by the RBI on June 8. Under this facility, the central bank absorbs 1.5% of the hedging cost, making dollar bond issuances more attractive for Indian banks. The surge in issuance has also given foreign investors a larger opportunity to gain exposure to Indian banks, without a corresponding rise in bond spreads.
The RBI's decision to close the FCNR(B) deposit scheme a month early has compressed transactions into a few days that banks had expected to execute over a longer period. As reported by Mint, treasury officials warn that some banks have mobilized $6-7 billion in dollars, creating deployment challenges. "If some banks have mobilized $6 billion or $7 billion, how do you deploy that much money in two weeks? For a foreign bank, where is the branch network to distribute that much money?" asked V.R.C. Reddy, treasury head at Karur Vysya Bank. The immediate challenge is that banks cannot lend money immediately, with the primary avenue for deployment being government securities and other AAA-rated instruments. This has resulted in the 10-year G-sec yield rising 5 basis points to 6.82% this week, while five-year and three-year yields increased by 9 and 4 basis points to 6.45% and 6.21% respectively.
Arup Rakshit, head of treasury at HDFC Bank, noted that the funds raised would underpin leverage to clients and help fund customers abroad, stating that "the amounts raised by the sector shows the strength of Indian banking." Vinod Venkatesh, co-head of financing solutions at HSBC India, observed that despite heavy supply in a short span, spreads on Indian bank bonds are only around 5 basis points wider versus what they were at the beginning of the year. "Initial concerns around oversupply seem to have faded, as investors have focused more on the sector's underlying credit strength, and many now see this as a rare window of opportunity to add exposure to the Indian banking sector," Venkatesh said. Gaurav Bhagat from MUFG reported that deals have been oversubscribed on average 2.89 times, with all deals performing well in the secondary market.
HDFC Bank raised $1.75 billion on Thursday, the largest by any Indian bank, following its $750 million issuance in June. The Mumbai-based lender plans to raise $1 billion total, with investor calls already lined up and final pricing expected by Friday. One banker noted that since this would be the last issue before the end of August, the final quantum could easily surpass $1 billion. If completed, this latest bond sale would take HDFC Bank's total proceeds from such issues to $1.75 billion, making it the most after ICICI Bank. Arup Rakshit from HDFC Bank emphasized that "the demand for our bonds is an endorsement for HDFC Bank's credit quality."
ICICI Bank, India's second-largest private lender, has emerged as the leading fundraiser with $3.5 billion raised through four bond sales this month alone. The bank is planning to raise $1 billion through private placement of five-year bonds at a coupon of 5.41%, marking its fourth bond sale this month. With over $3 billion already raised via the RBI window, this move contributes to the collective bond issuance of over $10 billion by Indian banks. ICICI Bank has been able to raise cheaper funds since the window was announced on June 5, giving them rupee liquidity that can support lending and investment and help margins. The bank's earlier issuances include $1 billion through five-year paper at 100 basis points over Treasuries with a 5.46% coupon in late July, followed by reissuance at 5.3520% raising $300 million in early August, and last week's $750 million through five-year papers at 105 basis points over Treasuries at 5.4170% coupon.
