Hi everyone, 
 
Welcome to the 179th edition of The Pattern, a weekly newsletter decoding the latest in the finance, technology, and the economy. 
 
Some of finance’s most meaningful shifts happen quietly. No announcements, no warnings and no urgency. Just a quiet, strategic shift. Indian banks preparing to raise about 15,000 crore in Tier II capital is exactly the kind of moment. 
 
This may come across as routine fundraising plan. But when you look closer, this is an emerging signal about the credit cycle that is forming, the risks banks are preparing for and the balance sheet discipline shaping Indian finance in 2025.  

SBI has already raised 7,500 crores through a 10-year Tier II issuance, and several lenders are set to follow. This is not a defensive play. It is a forward-looking move by banks who want to enter the next lending cycle with strength, not vulnerability. In essence, it’s about preparing for the lending cycle ahead.  
 
A late 2025 balance sheet move with early 2026 implications  
 
Tier II capital builds loss absorption for future credit expansion, not past risks. And this timing makes sense: credit growth touched 11.4% in October, signalling stronger loan demand as we head into late 2025. MSME lending has also accelerated after two years of muted demand, with both central data and market highlighting a clear pickup through FY25. 
 
This widening gap between credit and deposits is already putting pressure on banks to reinforce their capital buffers so they can continue supporting loan growth without tightening their risk appetite. If at all lenders want to extend more credit in 2026, they need a stronger foundation today. 
 
India’s bond market is creating the perfect window 
 
No doubt, there’s a market driven angle. Long-duration bond supply has been limited this year because many corporates front-loaded their fundraising earlier in 2025. That has created a scarcity of high-quality, long-term fixed-income instruments. 
 
Meanwhile, the market also expects the RBI to begin a shallow rate-cut cycle in early or mid-2026. Investors want to lock in yields now. Pension funds, insurance companies, and long-term investors have all been seeking safe, long-dated paper with predictable payout structures. Tier II issuances from strong banks match that demand perfectly. 

The result is a rare alignment: 
• Banks want capital buffers. 
• Investors want long duration. 
• Pricing is favourable. 

This alignment explains why SBI was able to raise 7,500 crores at a competitive coupon and why other banks are queuing up to issue bonds before conditions shift. 
 
A deeper logic: growth without fragility 

India’s credit-to-GDP ratio remains lower than major global peers, which suggests room for expansion. But room alone is not enough; expansion must come with resilience. Tier II capital strengthens the system’s ability to lend more without creating hidden fragility. 

By issuing Tier II now, banks are building a sturdier foundation for the growth expected in 2026. It is the financial equivalent of reinforcing beams before adding floors. When lending accelerates next year, lenders want to be prepared, not stretched. 

The competitive angle: stronger banks pull ahead 

Large, well-rated banks will raise Tier II faster and at more attractive pricing. Mid-sized banks may pay more. Smaller banks may have to wait for softer conditions. This divergence has the chances of shaping competitive dynamics next year. 

In a 2026 credit environment defined by infrastructure projects, renewable energy investment, manufacturing expansion and supply-chain financing, the banks with deeper capital buffers will have more freedom to lend, take calculated risks and capture market share. Tier II is not just a safety net. It is becoming a strategic advantage. 

Reading list 
 
1. Banks may raise Rs 15,000 cr through Tier II bonds: What is driving this demand? 
2. SBI likely to raise Rs 7,500 crore via 10-year tier II bonds 
3. India's bank credit-to-GDP ratio inches up to 56% in 2020, but still way behind peers: BIS data 
4. Credit growth inches up to 11.4% in October 3 fortnight: RBI data 
5. Loans flow at a faster clip into MSMEs; asset quality up, too 
6. Corporate Bond Issues Hit Record High In Q1 As Firms Front-Load Borrowings 
7. Expectations of a 50 bps rate cut in FY26: Garima Kapoor on RBI’s forward-looking policy 
8. Step up infrastructure credit flow, India requires $4.5 trillion growth capital: PFRDA 
9. PSU banks dominated bond issuances in FY25, more Tier-II debt raise likely this fiscal 
10. Indian banking sector robust with record-high capital buffers, non-performing loans ratios at multi-decade lows: RBI 
11. Bridging India’s Vast Infrastructure Financing Gap  
 
Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on X here and follow FinBox on LinkedIn to get the latest updates.  

Cheers,  
Mayank