State Bank of India (SBI) announced that it successfully raised ₹10,000 crore by issuing infrastructure bonds for the fifth time. These bonds were offered at an interest rate of 7.36%.
Now you must be thinking what are infrastructure bonds and why SBI has raised this huge amount of money. Infrastructure bonds are a type of financial instrument issued by banks or financial institutions to raise funds specifically for infrastructure projects. The funds raised through infrastructure bonds are utilized to support various critical infrastructure projects, such as the development of highways, power plants, affordable housing, and other infrastructure-related initiatives.
The response from investors was overwhelming, with bids totaling ₹19,884 crore, which is nearly four times the initial amount of ₹5,000 crore that was planned to be raised. The bank received a total of 143 bids, showing a wide range of participation from various investors, including provident funds, pension funds, insurance companies, mutual funds, and corporates.
The funds raised through these bonds will be used to strengthen SBI’s long-term resources for financing infrastructure projects and affordable housing initiatives. After considering the tremendous response, the bank decided to accept ₹10,000 crore at an interest rate of 7.36% per year. This interest rate represents a spread of 21 basis points over the corresponding FBIL G-Sec par curve.
With this issuance, the total value of long-term bonds issued by SBI now stands at ₹49,718 crore. SBI Chairman, Dinesh Khara, stated that this bond issuance will contribute to the development of a long-term bond curve. Additionally, it will encourage other banks to issue bonds with longer tenors, thereby strengthening the overall bond market.
