Bank of India intends to issue 10-year infrastructure bonds in order to raise Rs 5,000 crore.
According to several people with knowledge of the matter, Bank of India intends to issue 10-year infrastructure bonds this week in order to raise Rs 5,000 crore. A base offering amount of Rs 2,000 crore and an extra greenshoe option of Rs 3,000 crore will make up the issuance. In July of this year, the bank had earlier raised Rs 5,000 crore at a coupon rate of 7.54 percent through 10-year infrastructure bonds.
Due to difficulties in deposit mobilization and the necessity for credit expansion, state-owned banks have been looking more and more to the domestic capital market to raise money through infrastructure bonds. In the current fiscal year, a number of public sector banks, notably State Bank of India (SBI), Bank of Baroda, Canara Bank, Bank of Maharashtra, Bank of India, and Indian Bank, have raised a significant amount of money through infrastructure bonds.
Sources claim that banks have issued infrastructure bonds totaling Rs 74,256 crore so far this fiscal year. Because the money raised is exempt from regulatory reserve requirements like the statutory liquidity ratio (SLR) and cash reserve ratio (CRR), infrastructure bonds provide banks with a number of benefits.
The proceeds from infrastructure bonds can be used entirely for lending activities, in contrast to funds earned through deposits, where banks are required to hold 4.5% of the total as CRR with the Reserve Bank of India (RBI) and invest roughly 18% in government securities to satisfy SLR commitments.
SBI raised Rs 10,000 crore last week through 15-year infrastructure bonds at a coupon rate of 7.23%, increasing the total amount raised this fiscal year through long-term papers to Rs 30,000 crore. Longer-term papers have been in high demand in recent offers on the domestic capital market.
In order to bolster its capital base, Bank of India also intends to borrow Rs 2,500 crore through additional tier-I (AT-I) bonds in the upcoming quarter. Perpetual AT-I bonds have clauses that may affect interest payments in the event that specific capital or profit requirements are not met. Given their higher associated risks, these bonds may, in extreme circumstances, be converted into equity.
