Indian Bank Dollar Bond Sales Top Record $8.85 Billion

Indian financial institutions have sold nearly $9 billion in dollar-denominated bonds so far this year, a record that reflects how lenders are racing to use a central-bank facility offering cheaper hedging on overseas borrowing.

ICICI Bank Ltd. raised $750 million from U.S. debt on Monday. That pushed the 2026 total to $8.85 billion, according to Bloomberg data. The tally already exceeds the prior full-year record of $7.92 billion, set in 2019. More issuance is coming. Kotak Mahindra Bank Ltd. has set initial price guidance for a planned five-year dollar bond, and Yes Bank Ltd. has hired advisers for another potential dollar offering, people familiar with the matter said.

The deals accelerated after the Reserve Bank of India announced a concessional foreign-exchange swap facility in early June. The programme, open to banks and state-run companies, is designed to shore up the rupee, boost domestic liquidity, and support credit growth. The borrowing window runs through Dec. 31, which has prompted lenders to move quickly.

The RBI also set up a separate special window to attract foreign-currency deposits. It surprised traders on Friday by closing that facility a month early, after the nation drew more than $50 billion from its citizens overseas. The premature closure sparked a selloff in shorter-tenor India bonds, since it means less rupee liquidity to support demand. The deadline for the overseas borrowing facility remains unchanged for now.

“The recent surge in dollar bond issuance by Indian banks has primarily been to extend leverage to attract deposits from the nation’s overseas residents,” said Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings Inc. Yap expects lenders to rush to the dollar bond market over the next few weeks after the RBI shut the deposit swap window early. “Post this near-term surge, issuance will likely taper off, as the aforementioned impetus will no longer be there and still elevated hedging costs make it uneconomical for banks to issue offshore,” he said.

About two-thirds of dollar borrowings by Indian firms this year have come from financial institutions. The data show how lenders are responding to the central bank’s push for capital inflows, after a quiet market earlier in the year that reflected high hedging costs. The facility offers a fixed annual rate of 1.5% for an average maturity of at least three years, below current market costs.

The issuance surge has spanned private- and public-sector banks, according to Citigroup Inc. Strong global order books have allowed recent deals to price tighter than initial guidance, reflecting international investor demand for Indian financial-sector credit, the U.S. bank said.

The expanded supply of dollar notes creates a clearer picture for traders tracking India's capital account and rupee stability. With $8.85 billion already placed and more mandates in the pipeline, the RBI's swap facility is reshaping how lenders fund themselves.