Nabfid, Nabard to tap overseas market by FY26-end amid yield pressure

NaBFID aims to raise $1 bn via ECBs and dollar bonds while Nabard eyes overseas fundraising by FY26-end as rising bond yields and global risks weigh on domestic mobilisation

India’s National Bank for Financing Infrastructure and Development (Nabfid) and the National Bank for Agriculture and Rural Development (Nabard) are preparing to tap overseas markets for the first time by the end of the current financial year.

 

Rajkiran Rai G, Managing Director of Nabfid, said the company plans to raise around $1 billion through a mix of external commercial borrowings (ECBs) and dollar bonds, with nearly half of its total borrowings expected to come from the overseas route. He added that borrowing costs have risen by 15–20 basis points following the recent increase in yields. 

Meanwhile, Nabard Chairman Shaji K V said the lender aims to raise funds via ECBs by the end of FY26. However, the institution is not yet in a position to appoint merchant bankers. He added that the unexpected rise in yields had disrupted fundraising activity in the second quarter, a period that typically sees the highest mobilisation of resources. 

Bond yields have surged across the board despite a 100-basis point reduction in the policy repo rate since February, which included a front-loaded 50-basis point cut in the June monetary policy review.

 

A combination of factors — oversupply of long-duration bonds, fading hopes of further easing, proposed GST rate reductions, and short positions by investors — has reversed monetary transmission in the bond market.

 

Indian corporates, after raising a record Rs 4.07 trillion through debt in the first four months of the current financial year, have slowed down in August, with no major issuances so far.

 

Market participants said the bond market is currently in a wait-and-watch mode due to multiple uncertainties amid supply pressures from state and central government bonds. Key concerns include expectations of additional borrowing for fiscal deficit management due to GST rate cuts, and global risks such as US tariffs and trade tensions.

 

India witnessed a sluggish start to the current financial year in terms of external borrowing, with corporates raising just Rs 613 crore through overseas bonds, against Rs 22,844 crore during the same period of the previous year, according to data from Prime Database.

 

However, S&P’s upgrade of India’s sovereign credit rating to ‘BBB’ is expected to make overseas funding cheaper for Indian borrowers, thereby boosting offshore bond issuances, market participants said.

 

They added that overseas borrowing could become cheaper by around 15–25 basis points for top-rated companies.