Banks go slow in capturing market before new fiscal

By News Desk | March 20, 2010

Banks have been going slow in raising capital before the commencement of the new fiscal as many have already raised funds before this year, and the hiking of yields recently has made the prospects of selling bonds poor, according to merchant bankers. Normally during March end banks swarm the market with bond issues as thy get ready for the increase in demand for loans from businesses and public.

Numerous banks like Bank of India, Axis Bank, Bank of Baroda were anticipated to sell their bonds, but have stayed away from entering the market. But IDBI Bank and UCO Bank sold their bonds in the domestic market in the last few days, merchant bankers said.

Ajay Manglunia, head of the corporate desk at Edelweiss Securities said, “Most banks have already fulfiled their capital requirements by raising funds in the December-January period. Hardening of rates recently has also led banks to go slow on their capital-boosting activities”.

Corporate bond yields have been going up, following increase in government bond yields. Ashish Nigam, head of fixed income at Religare Asset Management said, “The outlook on credit demand remains dismal, especially since April to October is traditionally a period where companies do not take long-duration loans. If base rates come into effect, then demand for loans is going to take a further hit because lending rates would go up”.

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