The State Bank of India (SBI), the country's largest lender, has successfully raised Rs 10,000 crore through 15-year infrastructure bonds on Friday. The bonds were priced at a more favorable rate of 7.49%, which is five basis points cheaper than the coupon set at 7.54% for similar bonds issued in July. This marks SBI's fourth infrastructure bond issuance.
The bond issue was oversubscribed, attracting bids exceeding Rs 20,000 crore. The robust demand came from a diverse group of investors including provident funds, pension funds, insurance companies, mutual funds and corporates. Notable investors included the Employees Provident Fund Organisation (EPFO) and various insurance companies.
SBI executives have indicated that the pricing was more favorable than the July offering. The spread over the 15-year Government of India bond was 12 basis points this time, compared to 13 basis points in July. Despite India's inclusion in the JP Morgan GBI-EM index having little immediate impact, bank executives anticipate that future bond issuances could benefit from lower borrowing costs.
This recent bond issuance comprises a base issue size of around Rs 4,000 crore and a greenshoe option of Rs 6,000 crore. SBI has expressed that it may consider additional infrastructure bond offerings in the remaining part of the financial year, given the pricing advantage and the prospect of stable deposits.
The proceeds from these AAA-rated infrastructure bonds are exempt from reserve requirements like the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). As such, the entire amount can be channeled into lending operations. The funds raised will be used to bolster long-term resources for financing infrastructure and affordable housing.
With this latest offering, SBI has raised about Rs 40,000 crore through infrastructure bonds in the last financial year and the current one. The bank's first infrastructure bond issuance was in December 2022, raising approximately Rs 10,000 crore at a coupon rate of 7.51% for a duration of ten years. The bank had received approval to raise up to Rs 20,000 crore via infrastructure bonds in FY24. With this bond issue, the entire approved amount has been raised.
Market borrowing by banks has seen a jump since June 2024 as both public and private banks have been looking to tap the market through long-term bonds to shore up their capital and support lending. Higher yields have also ensured strong demand for such bonds with investors looking to lock-in their money at higher levels.
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