Finsamudra Desk
The bank is testing overseas debt markets for a benchmark-sized US dollar issuance as domestic deposit growth lags credit growth.
ICICI Bank is exploring the global bond market to raise $500 million. This would be its first benchmark-sized US dollar bond issuance since December 2017.
The move comes as Indian banks face a domestic liquidity squeeze, with credit growth outpacing deposit growth. Banks are competing hard for low-cost retail rupee deposits to fund an ongoing corporate credit boom.
Domestic borrowing costs have risen as liquidity has tightened. Even after accounting for currency hedging costs, raising dollars overseas can work out cheaper than raising an equivalent amount domestically.
Tapping the offshore dollar bond market also diversifies ICICI Bank's funding base beyond domestic retail depositors, reducing reliance on one liability source in a volatile rate environment.
If large banks like ICICI are forced overseas for funding because domestic deposits can't keep pace with credit demand, the domestic 'war for deposits' will likely intensify. For DSAs and connectors, this points to continued pressure on loan pricing and a premium on being able to source high-quality retail deposit or loan business that banks are competing hard to capture.
A structural shift toward offshore dollar funding also signals that banks see the domestic liquidity crunch as more than temporary. For lenders and NBFCs sourcing funds domestically, this could mean sustained higher borrowing costs relative to banks that can access cheaper overseas capital, potentially widening the cost-of-funds gap in the credit distribution ecosystem.
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