Synopsis: State Bank of India (SBI) successfully raised Rs. 10,000 crore through the sale of 15-year infrastructure bonds at a 7.36% coupon rate, marking its first debt issuance of the financial year. The bond sale saw strong demand, attracting 143 bids totaling over Rs. 19,884 crore. The funds will support infrastructure and affordable housing projects. Separately, ICICI Bank plans to raise up to Rs. 3,000 crore through 10-year infrastructure bonds on June 28.
State Bank of India (SBI) raised Rs. 10,000 crore through a sale of infrastructure bonds, marking its first debt issuance of the current financial year.
These bonds, maturing in 15 years, offer a 7.36% coupon rate, which is 21 basis points above the corresponding government security yield.
The issuance saw strong demand, with 143 bids totaling over Rs. 19,884 crore, significantly surpassing the base size of Rs. 5,000 crore and a greenshoe option of Rs. 5,000 crore.
Investors included provident funds, pension funds, insurance companies, mutual funds, and corporates.
The funds will be used to support infrastructure and affordable housing projects.
SBI’s bonds typically have the lowest coupons in the banking sector due to the bank's perceived low risk from government ownership and its status as the largest lender in India.
Separately, ICICI Bank is expected to conduct an infrastructure bond sale on June 28, aiming to raise up to Rs. 3,000 crore through 10-year securities, according to debt capital market sources.
Funds raised through infrastructure bonds with a minimum maturity of 7 years are exempt from statutory liquidity ratio and cash reserve ratio requirements.
Including the latest issuance, SBI's total outstanding long-term bonds amount to Rs. 49,718 crore.
Last week, SBI’s board approved a proposal to raise up to Rs. 20,000 crore through long-term bonds to meet the growing demand for loans.
As of May 31, bank credit growth was at 16.1% year-on-year, outpacing deposit growth of 12.2%, according to the Reserve Bank of India, excluding the HDFC and HDFC Bank merger impact.
In conclusion, State Bank of India's successful Rs. 10,000 crore infrastructure bond sale, characterized by strong investor demand and a competitive 7.36% coupon rate, reflects the bank's robust market position and strategic funding efforts.
The funds will enhance infrastructure and affordable housing financing, aligning with SBI's growth objectives.
Meanwhile, ICICI Bank's upcoming bond sale indicates a similar trend among private lenders to tap into debt markets for long-term funding.
With credit growth outpacing deposits, such initiatives are crucial for meeting rising loan demand.
SBI's proactive approach in raising substantial long-term capital underscores its commitment to maintaining liquidity and supporting economic development.