'Rising loan appeal hits corporate bond market's momentum'

India's corporate bond market, driven by public sector undertaking (PSU) banks and financial institutions last year, is losing momentum since the second quarter of FY26.

- BS REPORTER

This comes as corporates turn to bank loans for cheaper funding.

With yields staying elevated and demand subdued, total issuance is expected to fall well below last year's level, panellists said at a discussion moderated by Subrata Panda of Business Standard.

While sharing his view on the panel titled 'Navigating Global Turmoil: Can India stay the course?' Shailendra Jhingan, head-treasury and economic research, ICICI Bank, said, "We think that overall, the number last year, which was ₹11.1 trillion or thereabouts, we are going to end (2025-26) at a lower number. The main reason I see is that in the loan market, the rates are significantly cheaper. There is a move where corporates are moving away from bonds and accessing the loan market. With the repo rate at 5.5 per cent, the external benchmark lending rate (EBLR) loans look far more attractive compared to corporate loans at the current level. So, I think that trend is pretty much evident. The supply will be tepid going ahead also."

After a surge in corporate bond issuances in the first quarter, activity slowed in the second quarter as borrowing costs climbed.

Indian corporates, had raised a record ₹4.07 trillion through debt in the first four months of the current financial year.