Axis Bank and Kotak Mahindra Bank may sell infrastructure bonds to raise Rs4,500 crore

20 Sep 2022 , 08:38 AM

Banks are back in the market to sell infrastructure bonds, with Kotak Mahindra and Axis Bank planning issuance of up to Rs4,500 crore in the next weeks, according to news reports. This is due to banks being pressured by growing deposit rates and loan demand.

Banks believe it makes sense to raise long-term funds rather than chasing deposits that are repriced every month, with the Reserve Bank of India raising its policy rate to manage inflation, as the incremental credit-deposit ratio is approaching 80%.

For the time being, Axis Bank may raise up to Rs3,000 crore as it assesses the market’s interest in the paper. Up to Rs1,500 crore is what Kotak Mahindra Bank is looking to raise.

Ratings for both proposed bonds are triple-A. The rates, which will ultimately be decided through an exchange bidding procedure, may fall between 7.40% and 7.60%, according to reports.

Due to the lack of regulatory requirements, banks will have more freedom to increase lending without restricting finances, however, this may not yield as many profits as loans given to institutions and people.

The credit-deposit ratio for Indian banks in the April-June quarter of this fiscal year increased from 70.5% to 73.5%.

Reportedly, on September 13, the ICICI Bank has already sold infrastructure bonds, raising Rs2,100 crore for seven years at 7.42%.

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