SBI to raise Rs 10,000 crore through infrastructure bonds in FY23

State Bank of India (SBI) intends to sell Rs 10,000 crore worth of infrastructure bonds this fiscal year. The Executive Committee of the Central Board of the State Bank of India will meet on Tuesday, November 29, 2022, to discuss, among other things, whether to seek approval for the issuance of Infrastructure Bonds up to a maximum of Rs 10,000 crores through a public offering or a private placement during FY23.

The bank stated that a greenshoe option of Rs 5,000 crore is included in the planned offering worth Rs 10,000 crore. As per online reports, the duration of the infrastructure bonds will likely be 10 years. A source stated, “SBI is planning to raise 10 years of AAA-rated infrastructure from ICRA and India Ratings for a total of 5,000 crores plus 5,000 crores.”

“The demand for the SBI bonds will be highly aggressive; it may be around 10 basis points higher than the annualized yield of the 10-year government security. Given where REC bonds are presently trading, it may be in the range of 7.60—7.65 percent. Additionally, since it is an infrastructure bond, SBI is usually the first choice for insurance companies looking for items in the infrastructure area, the source added.

Banks benefit from issuing infrastructure bonds because they can raise money without having to set aside a portion of it for the cash reserve ratio or the statutory liquidity ratio, which are requirements for regular deposits.