
State Bank of India (SBI), the country’s largest lender, has successfully raised Rs 10,000 crore at a coupon of 7.36 per cent through 15-year infrastructure bonds. This development was announced by the bank in a statement released on Wednesday.
Sixth Infrastructure Bond Offering:
This issuance marks SBI’s sixth infrastructure bond offering, demonstrating the bank’s proactive approach in raising funds. Notably, the total outstanding long-term bonds issued by the bank now stands at an impressive Rs 59,718 crore.
Strong Investor Interest and Oversubscription:
The issue attracted substantial interest from investors, with bids exceeding Rs 18,145 crore, indicating an oversubscription of approximately 3.6 times against the base issue size of Rs 5,000 crore. The bank reported receiving about 120 bids from various investors, including provident funds, pension funds, insurance companies, mutual funds, and corporate houses.
Implications and Future Outlook:
SBI Chairman Dinesh Khara emphasized the significance of this issuance, stating that it will aid in developing a long-term bond curve and encourage other banks to issue bonds of longer tenor. Furthermore, raising funds through infrastructure bonds offers distinct advantages for banks, as it exempts them from regulatory reserve requirements such as the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). Unlike funds raised through deposits, infrastructure bond proceeds can be fully deployed for lending activities.
Expansion of Infrastructure Bond Offerings:
Several other state-owned lenders, including Canara Bank and Bank of India, are also contemplating raising funds through infrastructure bonds, indicating a growing trend in the banking sector.
Bank of Baroda’s Plan for USD Issuance:
In a parallel development, Bank of Baroda (BoB), another state-run lender, is planning to raise funds through a USD issuance. BoB has decided to issue $500 million standalone “REG S” bonds under its Medium Term Notes (MTN) programme of $4 billion and has invited applications for joint lead managers for the proposed international USD bond issuance.
Previous Fundraising and Industry Trends:
Previously, in January, SBI raised $600 million by issuing a five-year paper from various global investors as part of its $10 billion medium-term note programme. Following this, several Non-Banking Finance Companies (NBFCs), including Shriram Finance, Muthoot Finance, Manappuram Finance, and Sammaan Capital (erstwhile Indiabulls Housing Finance), also raised money through USD bonds, indicating a broader trend in the industry.