Commercial fundraising surges 138% to ₹10.6 lakh crore in 4MFY27: SBICAPS
ADVERTISEMENT
Commercial fundraising in India is witnessing a strong revival, with the total flow of financial resources surging 138% year-on-year to ₹10.6 lakh crore in the first four months of FY27, according to a report by SBICAPS.
The sharp increase was primarily driven by an 820% surge in non-food bank credit, which more than offset the modest growth in non-bank sources of financing. Banks accounted for 63% of the total commercial resource flow during 4MFY27, retaining their leadership position from FY26.
SBICAPS attributed the resurgence to India's strong economic growth, expectations that the country will remain the fastest-growing major economy despite global headwinds, and improving credit conditions. Banks are also benefiting from a rate advantage over capital markets while low stressed assets, adequate capital, and strong profitability have strengthened their ability to extend credit.
The report expects bank credit growth to remain in the high double digits through much of FY27.
Large industries signal revival in private capex
Industry credit growth is approaching 20% yoy, keeping pace with overall non-food bank credit growth. Large industries, in particular, are borrowing at a strong pace, signalling early signs of a revival in the private capital expenditure cycle.
Some of the increase could be attributed to favourable interest-rate differentials and higher working-capital requirements amid rising prices. However, SBICAPS said the emerging capex cycle has deeper roots in the energy and capital goods and engineering sectors.
The revival is also supported by healthier corporate and banking balance sheets, which could allow the investment cycle to remain sustained.
The report said the shortfall in effective deposits has fallen sharply to around ₹2 lakh crore as of August 2026 from more than ₹12 lakh crore when the forex flow scheme was introduced. This was aided by an estimated ₹11 lakh crore, or around $115 billion, of additional FCNR(B) deposits mobilised under the scheme.
The influx has helped bring the credit-deposit ratio down to 80.6% from 82.9%. Private sector banks benefited disproportionately, with their weighted average domestic term deposit rate for fresh deposits declining by 25 basis points between June and July 2026, while public sector banks saw no change.
The improvement in deposit availability is also expected to reduce banks' reliance on borrowings. Certificate of deposit (CD) outstanding, which had touched an all-time high amid a steep yield curve and elevated bond-market rates, is expected to ease in the coming months.
Infrastructure bond issuances are also likely to remain muted in FY27 compared with previous years, given ample liquidity, an improved credit-deposit ratio, elevated bond-market rates and limited near-term maturities.
Banks, however, have limited scope to sell investments to fund credit expansion, with their holdings of government securities at a decade-low level. The increase in deposits could instead encourage banks to step up investments in government securities to manage risk-weighted assets (RWAs) as their loan portfolios become riskier.
Banks face ₹1.5 lakh crore gross capital requirement
Strong credit growth is expected to create a significant capital requirement for banks. SBICAPS estimates that banks could face a gross capital requirement of more than ₹1.5 lakh crore between September 2026 and March 2028.
The requirement will be driven by strong credit growth, upcoming calls and maturities of capital instruments, and a possible increase in RWAs. However, the net requirement is expected to be substantially lower, supported by healthy bank profitability and changes in capital computation.
The abolition of the investment fluctuation reserve (IFR) requirement and greater recognition of quarterly profits, subject to conditions, could also support banks' capital ratios. Banks may additionally defer some capital issuances if the prevailing interest-rate environment makes refinancing unattractive.
Basel III Additional Tier 1 (AT-1) bonds are expected to account for a large share of incremental gross capital requirements. Around ₹58,000 crore of AT-1 bonds are due to mature or reach their call dates between September 2026 and March 2028, creating refinancing pressure.
Public sector banks are expected to account for around 90% of these upcoming call dates and maturities. Private sector banks hold only about 7% of outstanding AT-1 bonds.
By contrast, refinancing requirements for Basel III Tier 2 bonds are expected to remain limited over the period. Only around 10% of outstanding Tier 2 bonds are due to mature between September 2026 and March 2028, with a much larger refinancing cycle expected from FY33 to FY36.