Banks' bonds triple in 2006

Indian banks tripled their bond issuance in 2006 to $2.29 billion in 2006 from $625 million in 2005, as the lenders sought to boost capital adequacy in the face of unprecedented growth in credit for the third successive year.

The Reserve Bank in July this year allowed banks for the first time to issue subordinated debt to offshore investors, as part of the comprehensive guidelines on how banks can raise debt capital, both Tier I and Tier II.

In 2005, there were two overseas bond issues by Indian banks. In 2006, the number of issues jumped to 11, ranking Indian banks the second largest issuers of hybrid and subordinated debt after South Korea this year.

Top issuers in 2006 included ICICI Bank, which raised $340 million via perpetual bonds and Canara Bank which raised $250 million.

"We are seeing banks in India proactively strengthening every aspect of their balance sheets as they prepare for more robust growth ahead," said Madan Menon, co-CEO of Barclays India. Menon said he expects overseas debt issuances by banks to continue to grow rapidly in 2007.

The increase in loan assets of banks in India has been growing at over 30 per cent for the third year now, as the economy grows rapidly. The GDP grew by 9.1 per cent in April-September 2006.

In 2005, India was sixth amongst Asian countries in terms of bond issuance by banks for senior and subordinated debt. China was the third biggest issuer in 2005 with volumes of $2 billion. in 2006, China was at ninth in ther egion as issuance slipped to $100 million.