Andhra Bank will raise Rs 1,000 crore through long-term infrastructure bonds to fund projects with long gestation. Rating agency CRISIL has assigned its ‘AA+/Stable’ rating to the Rs 1,000-crore long-term infrastructure bonds of the bank. It is the first issuance to be rated after the RBI revised regulations on July 15, CRISIL said in a statement.
The new rules are positive for banks, as they open up a much-needed, long-term funding avenue — that, too, with minimum regulatory pre-emption.
Pawan Agrawal, senior director, CRISIL Ratings, said: “Given the exemption from statutory reserve requirements and priority-sector obligations, these bonds will be cost-effective for the issuing bank.”
The benefit would be around 75 basis points compared with longer-maturity deposits. The bonds will also help banks improve their asset-liability profile.
RBI’s move to revise the regulations on long-term bonds (with a minimum maturity of seven years) for financing infrastructure projects and for affordable housing — by scheduled commercial banks — followed a similar announcement in the Union Budget on July 10.
Apart from statutory liquidity ratio and cash reserve ratio exemptions, advances against these bonds are also exempt from priority-sector lending obligations.
Around a fifth of outstanding banking sector credit as on March 31, 2014, was to infrastructure and affordable housing segments. CRISIL estimates at least Rs 3,00,000 crore of loans to these sectors – both current and prospective -- would qualify for funding through infrastructure bonds in the current fiscal.
Agrawal said, “Given the magnitude of eligible loans for funding, the issuances of these bonds will pick up over time.”
These measures by RBI will also help in deepening and developing the Indian bond market, rating agency added.
