[ad_1]
State Bank of India (SBI), the country’s largest lender, raised Rs 9,718 crore through the issuance of 15-year infrastructure debt on Wednesday, with the bonds bearing a coupon of 7.70 per cent.
The coupon is the rate of interest that is periodically paid out to investors. The investors included mutual funds, provident and pension funds and insurance companies, SBI said through a release.
“The fund proceeds will be utilized in enhancing long-term resources for funding infrastructure and the affordable housing segment. The issue attracted an overwhelming response from investors with bids of Rs. 14,805 crores and was oversubscribed by Rs 2.96X against the base issue,” SBI said. The bank receives a total of 118 bids for the bond sale.
SBI’s latest bond sale marks the first time an Indian bank has issued infrastructure bonds with a tenure of 15 years. The bank said that the sale would aid in the development of a long-term infrastructure bond curve and encourage banks to issue such debt for longer maturities.
The coupon rate of 7.70 per cent represents a spread of 17 basis points over the corresponding government security yield curve provided by the Financial Benchmarks of India Limited, SBI said.
Prior to the latest bond sale, SBI had issued 10-year infrastructure bonds worth Rs 10,000 crore at a coupon of 7.51 per cent on December 6, 2022.
Infrastructure bonds are securities that are exempt from the computation of net demand and time liabilities (NDTL) – a proxy for deposits. Hence, they are not subject to cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements.
Infrastructure projects aside, the money can also be used for loans to affordable housing ventures.
SBI’s infrastructure loans book grew by 10.81 per cent year-on-year (YoY) to Rs 3.67 trillion as of September 2022. Of this, exposure to the power sector was Rs 1.95 trillion and that to roads was Rs 95,614 crore.
Last month, private sector lender ICICI Bank also raised Rs 5,000 crore through infrastructure bonds for funding projects in segments like power and roads, etc. The coupon for ICICI Bank’s bonds was set at 7.63 per cent. The private bank’s bonds were of seven-year maturity. State-owned lender Bank of Baroda had also recently sold infrastructure bonds.
Over the last few months, banks have embarked on a slew of debt issuances in order to raise capital as deposit growth has continued to lag credit growth significantly. This has exerted pressure on banks to mobilise funds in order to fund loan growth.
The latest RBI data showed that as on December 30, 2022 bank credit growth was at 14.9 per cent year-on-year. Deposit growth was at 9.2 per cent over the same period.
[ad_2]
Source link
