Using infrastructure bonds, the State Bank of India raises Rs 10,000 crore

25 Sep 2023 , 12:59 PM

State Bank of India (SBI), a major lender, issued infra bonds with a coupon rate of 7.49% to generate around Rs 10,000 crore. This is the bank’s fourth offering of bonds relating to infrastructure.

‘The issue attracted an overwhelming response from investors with bids of Rs 21,045 crore and was subscribed by more than 5 times against the base issue size of Rs 4,000 crore,’ SBI stated in a press release.

134 bids were submitted for the issue, demonstrating a more diverse level of interest. Investors included business entities, insurance firms, mutual funds, provident funds, pension funds, and more.

The bank has chosen to take Rs 10,000 crore at a coupon rate of 7.49% payable yearly based on the response. Over the matching FBIL G-Sec par curve, this represents a spread of 12 basis points.

Bond revenues will be used to increase long-term funding sources for the affordable housing and infrastructure sectors.

The bank had previously offered long-term notes worth Rs 10,000 crore in August at a 13 basis point spread over the comparable FBIL G-Sec par curve.

In January, SBI raised Rs 9,718 crore in infrastructure bonds. For that issue, the spread was 17 basis points.

All domestic credit rating agencies have given the bank a AAA credit rating with a stable outlook for these securities. With this latest issuance, the lender now has Rs 39,718 crore worth of Long-Term Bonds outstanding.

Additionally, this issuance is particularly important because the bank has been successful in raising long-term bonds in a series at finer spreads.

‘We believe that this issuance may help in developing a long term bond curve and encourage other banks to issue bonds of longer tenor,’ the Bank said in a statement.

Long-term debt instruments with a minimum maturity of seven years include infrastructure bonds. According to RBI regulations, banks are not required to maintain cash reserve ratios (CRR) and statutory liquidity ratios (SLR) on these securities because they are used to finance the infrastructure industry.

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