Reserve Bank of India (RBI) Governor Sanjay Malhotra delivers the Monetary Policy statement, Wednesday
| Photo Credit:
RBI Youtube via PTI Photo
Corporates are increasingly relying on the bond market to raise funds as the transmission of policy rate cuts is faster in the money market compared to banks, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Wednesday while announcing the policy rates.
He said that this trend has become more visible as large companies are now choosing to raise money through market-based instruments such as commercial papers and corporate bonds, rather than depending mainly on bank credit. The Governor stated, “As transmission to money markets has been faster, large corporates increasingly relied on market-based instruments such as commercial paper and corporate bonds to source funds”.
According to the RBI data, bank credit grew at 12.1 per cent during the financial year 2024-25, which is slower than the 16.3 per cent recorded in 2023-24. But it is still higher than the average growth of 10.3 per cent seen in the last ten years before 2024-25.
However, the flow of non-food bank credit came down by ₹3.4 lakh crore, from ₹21.4 lakh crore in 2023-24 to around ₹18 lakh crore in 2024-25. Despite this fall, the total financial resources available to the commercial sector actually increased. This is because the flow of funds from non-bank sources made up for the lower bank credit.
In fact, the total flow of financial resources to the commercial sector rose from ₹33.9 lakh crore in 2023-24 to ₹34.8 lakh crore in 2024-25. This upward trend continues in the current financial year as well. Also, many large companies have seen their profits rise, which means they are also using their own internal resources to finance business growth.
Data show that CP (Commercial Paper) issuances by non-financial entities rose sharply to ₹0.78 lakh crore in 2025-26 (up to June), from ₹0.30 lakh crore a year ago.
Commercial Paper is an unsecured money market instrument issued in the form of a promissory note. Similarly, corporate bonds issued by non-financial entities increased significantly to ₹0.95 lakh crore from just ₹0.09 lakh crore in the same period last year. This shift shows how corporate are exploring new ways to raise money efficiently, taking advantage of market-based instruments and higher internal savings. The above data and points proves that corporates are using market-based borrowings primarily because it offers Lower costs, Faster rate adjustments and Greater flexibility.
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Published on August 6, 2025
