Corporate bond sales seen slowing as borrowing rates hit 7-year high

Indian corporations and non‑bank lenders are reducing the speed of bond fundraising after borrowing costs hit seven‑year peaks, according to investors and merchant bankers.

LSEG benchmark yields for AAA‑rated corporate bonds with maturities of two to five years climbed above 8 % last week, marking the highest level since the January‑March 2019 period, according to the data.

In May the two‑year AAA corporate bond yield jumped roughly 40 basis points, and yields in the three‑to‑five‑year bracket rose about 30 basis points.

Borrowing costs have risen as market participants anticipate higher policy rates and tighter liquidity from the Reserve Bank of India.

Indian companies raised about 1.07 trillion rupees (US$11.24 billion) in April‑May, the lowest sum for the opening two months of any fiscal year since 2022, when the central bank implemented an off‑cycle rate increase, according to Prime Database data.

The pipeline for the coming months appears thin, likely topping out near 1 trillion rupees, four merchant bankers noted. In the same period last year, companies issued 1.75 trillion rupees of debt.

“The sharp rise in corporate bond yields lifts borrowing costs and is likely to postpone fundraising plans for many issuers,” said Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap.

“The current setting is also expected to speed the move toward floating‑rate bonds, short‑term borrowing and bank loans instead of committing to higher long‑term fixed‑rate funding.”

Bond‑market rates are rising faster than bank lending rates, prompting large companies to shift toward bank borrowing.

Banks’ credit to non‑bank financial companies rose nearly 28 % in April to 20.56 trillion rupees, the central bank’s latest data show.

“We have already observed some companies shifting to bank loans. Previously, when NBFCs approached us, they requested quotes for both bonds and loans; now they concentrate solely on loans, and we anticipate this business will expand over the year,” said Binod Kumar, managing director and CEO of Indian Bank.

($1 = 95.1675 Indian rupees)

Published on June 2, 2026