Fundraising activity by Indian banks through key capital market routes has plummeted to its lowest point in three financial years, according to the latest data from the Reserve Bank of India (RBI). The central bank's Trend and Progress of Banking in India 2024-25 report reveals a stark slowdown in mobilising funds via instruments like private placements, qualified institutional placements (QIPs), and preferential allotments.
A Sharp Decline in Capital Mobilisation
Provisional data up to November in the current financial year (FY26) shows that banks have raised only ₹58,912 crore through a total of 17 issuances. This figure marks the lowest fundraising level since FY23. The drop is dramatic when compared to the preceding years. In FY25, banks had raised a substantial ₹1.49 trillion through 36 issues, and in FY24, the amount was ₹1.31 trillion via 40 offerings.
This significant contraction reflects a shift in strategy as banks adopt a more cautious approach towards their balance sheets. The trend is driven by tighter liquidity conditions in the system and a reassessment of evolving funding requirements.
Public Sector Banks Drive the Downturn
A sector-wise breakdown of the FY26 data highlights where the decline originated. Public sector banks (PSBs) accounted for the bulk of the funds raised so far this year, mobilising ₹40,719 crore through six issues. However, this is a massive fall from the ₹1.33 trillion they raised in FY25.
Private sector banks raised ₹18,192 crore through 11 issues in FY26, which is a slight increase from the ₹16,419 crore they mobilised in FY25. Notably, foreign banks did not utilise the private placement route at all during the current period under review.
The RBI report noted that fundraising had actually increased during the 2024-25 period (FY25), growing by 36.6% for PSBs largely through debt instruments. This makes the sudden reversal in FY26 even more pronounced.
Understanding the Reasons Behind the Slowdown
Analysts and the report itself point to several interconnected factors causing this fundraising slump:
- Ample Deposit Growth: Select lenders have experienced strong deposit accretion, reducing their immediate need to tap expensive capital markets.
- High Bond Yields: Elevated government bond yields for much of FY26 made borrowing through debt issuances less attractive, as banks waited for more favourable rates.
- Liquidity Expectations: There is an anticipation of more supportive liquidity conditions ahead, prompting banks to delay their fundraising plans.
- Interest Rate Uncertainty: The unclear trajectory of the interest rate cycle likely deterred banks from locking in long-term funds at potentially high costs.
For several years, banks had relied heavily on private placements to bolster capital and meet regulatory norms, especially when credit growth was sprinting ahead of deposit mobilisation. The steady rise from ₹1.23 trillion in FY23 to ₹1.31 trillion in FY24 and a peak in FY25 has now been interrupted.
The current FY26 data suggests lenders are actively reassessing their funding mix and may be turning to alternative resources. However, a revival in issuance activity is possible in the second half of FY26 if borrowing costs ease and the demand for credit remains strong, setting the stage for a potential rebound in bank capital raising.
