ICICI Bank to issue infra bonds for raising Rs10,000 crore

5 Sep 2022 , 09:05 AM

Up to Rs10,000 crore in infrastructure bonds is anticipated to be raised by private sector lender ICICI Bank for infrastructure project financing and financing of affordable housing projects.

The advantage of the long-term instruments is that they are free from maintaining the CRR and SLR requirements (cash reserve ratio and statutory liquidity ratio). This aids in reducing the asset-liability management (ALM) problems they have while providing project loans for infrastructure.

According to market sources, the bonds, which have an ICRA rating of “AAA,” may be issued in one or more tranches depending on demand and market circumstances. According to the lender’s investor presentation for Q1FY23, ICICI Bank’s borrowing through long-term infrastructure bonds increased from Rs22,139 crore in 2017 to Rs38,809 crore at the end of June 2022.

With a 7.39 % yield on these notes, the Bank of Baroda was able to raise Rs1,000 crore in August 2022. It can raise up to Rs5,000 crore with clearance. Long-term infrastructure bonds should mature in at least seven years. Before using bonds to raise money, banks could have offered aid to such infrastructure initiatives. Subject to certain restrictions, the RBI also permits the exclusion from Adjusted Net Bank Credit (ANBC) of money obtained through long-term bonds for the financing of infrastructure and affordable housing.

Investments and lending into the infrastructure sector, which includes roads, ports, and power, have increased along with the need for capital expenditures to sustain economic development. In July 2022, the banking industry’s loans to the infrastructure sector totaled Rs12.14 trillion, an increase of 11.1% year over year (YoY). According to RBI data, lending was stable last year and only increased by 0.3% YoY in July 2021.

Power projects account for around half of the loans in the infrastructure sector (Rs6.27 trillion), with roads coming in second (Rs 2.79 trillion). Banks, particularly private sector lenders, were reluctant to provide new loans to projects in the sector due to the high prevalence of stressed infrastructure assets.

For feedback and suggestions, write to us at [e-mail]