Funds amassed by Indian corporations decline by a staggering 40% in the month of July 2025
Indian corporates have shifted their financing strategies, leading to a significant drop in resource mobilisation by public sector banks (PSBs) and central public sector enterprises (CPSEs) in July 2025. According to recent reports, resource mobilisation stood at ₹56,589 crore in July 2025, a 40% decrease compared to the same month last year.
The primary reason behind this trend is the rising preference for capital markets, particularly cheaper and more flexible funding options like corporate bonds and equity markets. In FY25, resource mobilisation via capital markets increased by nearly 33%, reaching Rs 15.7 lakh crore, driven largely by private placements of debt instruments and equity issuance.
High-rated corporate bonds, particularly AAA-rated ones, offer yields slightly above government bond levels but attractive enough to shift corporate borrowing preferences. This shift reduces the demand for bank credit and resource mobilisation by public banks.
Bank lending to industry grew very modestly at 6.9% in FY25, reflecting restrained activity from public sector banks as corporates diversify funding sources and possibly banks' cautious lending stance.
Broader macroeconomic challenges like inflation pressures, fiscal constraints, and shifting government spending priorities may also constrain resource mobilisation capacity of CPSEs and public banks.
On the bright side, banks are taking comfort in prevailing surplus liquidity, with a 100-basis-point cash reserve ratio cut set to kick-in in four tranches between September and November. This move is expected to further improve system liquidity and reduce near-term funding pressure.
Issuers are expected to reassess their strategies post-policy, especially if rate signals, liquidity conditions, or geopolitical clarity improve in the coming weeks. It is worth noting that no issuances of AT (Additional Tier) 1 bonds, Tier 2 capital, or infrastructure bonds by PSBs or CPSEs were reported during the period from April to July 2025.
In the private sector, the issuance activity has been subdued, with most being token issuances aimed at maintaining market access rather than meeting immediate capital requirements. On the contrary, several AAA-rated private sector entities and leading NBFCs actively accessed the bond market to lock into cheaper, fixed-rate funding, taking advantage of the rate arbitrage over MCLR-linked floating rate bank loans.
The sharp July slowdown in issuances appears more a case of tactical deferment than structural weakness, according to the Rockfort Fincap chief. Select CPSEs tapped the bond market in July, while many stayed away, either due to timing considerations or looking for alternative fund raising options.
In other news, SAP has opened its Devanahalli campus with an investment of €194 million, with phase two due by 2028.
[1] Reserve Bank of India’s June 2025 Financial Stability Report [2] International Monetary Fund Working Paper, 2023 [3] Business Standard, 1st August 2025 [4] The Hindu BusinessLine, 3rd August 2025 [5] Economic Times, 5th August 2025
- The decline in resource mobilisation by PSBs and CPSEs in July 2025 can be traced back to the increasing preference for capital markets among Indian corporates.
- The growth in resource mobilisation via capital markets in FY25 was driven largely by private placements of debt instruments and equity issuance, with a near 33% increase.
- High-rated corporate bonds, such as AAA-rated ones, offer yields slightly above government bond levels and are attractive enough to shift corporate borrowing preferences, thus reducing demand for bank credit and resource mobilisation by public banks.
- Bank lending to industry grew modestly at 6.9% in FY25, with the majority of the growth coming from private banks, as public sector banks exercised caution in their lending practices.
- Broader macroeconomic challenges, like inflation pressures, fiscal constraints, and shifting government spending priorities, might limit the resource mobilisation capacity of CPSEs and public banks.
- Banks are taking comfort in the prevailing surplus liquidity, with a 100-basis-point cash reserve ratio cut set to provide additional liquidity in four tranches between September and November.
- Issuers are likely to re-evaluate their strategies following the latest policy changes, especially if there are improvements in rate signals, liquidity conditions, or geopolitical clarity in the coming weeks. Meanwhile, no issuances of AT (Additional Tier) 1 bonds, Tier 2 capital, or infrastructure bonds by PSBs or CPSEs were reported between April and July 2025.
