 "Public-sector banks, including Canara Bank and Bank of India, are tapping the infrastructure bond market.")
Illustration: Ajay Mohanty
Public-sector banks, including Canara Bank and Bank of India, are tapping the infrastructure bond market.
Canara Bank on Tuesday raised Rs 10,000 crore at a coupon rate of 7.40 per cent through 10-year infrastructure bonds.
This comes after SBI on July 10 raised Rs 10,000 crore also through infrastructure bonds with a 15-year tenor at a coupon rate of 7.36 per cent.
SBI had raised another round of Rs 10,000 crore on June 26 at the same coupon rate.
Bank of India will tap the debt market on July 18 to raise about Rs 5,000 crore.
Pune-based Bank of Maharashtra has said it is looking to raise Rs 10,000 crore through infrastructure bonds, with the first tranche of Rs 2,000-2,500 crore expected this year.
The money raised through infrastructure bonds is advantageous for banks because it is exempt from regulatory reserve requirements such as the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).
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The spreads are attractive for such instruments and there is a lot of appetite among long-term investors, especially after the erstwhile HDFC and the National Highways Authority of India came to this market. “Hence we are seeing so many issues. However, the funds raised through infrastructure bonds cannot be a substitute for deposits in banks,” said an industry source.
Among private lenders, ICICI Bank last month raised Rs 3,000 crore at a coupon rate of 7.53 per cent through 10-year infrastructure bonds. According to media reports, HDFC Bank is looking to use the infrastructure-bond route to raise up to Rs 15,000 crore.
Infrastructure bonds have a tenor of at least seven years and the proceeds are utilised by banks to fund long-term infrastructure projects.
Banks are issuing infrastructure bonds because they are facing huge pressures in mobilising deposits to meet credit demand.
The persistent credit-deposit gap, which has been repeatedly flagged by the Reserve Bank of India (RBI), shows the slow pace of deposit mobilisation.
According to the latest data, deposit growth dipped further to 10.6 per cent as of June 28. Credit growth during this period was 13.9 per cent. Experts say banks will step up efforts to accelerate deposit mobilisation.
At least three public-sector banks, including SBI, have launched special deposit schemes for a limited period.
First Published: Jul 16 2024 | 6:41 PM IST
