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The State Bank of India (SBI) has raised Rs 10,000 crore through 15-year infrastructure bonds to fund projects in sectors like power, roads etc. The coupon rate for bonds is 7.36 per cent.
With the current issuance, the total outstanding Long-Term Bonds issued by the country’s largest bank is at Rs 49,718 crore.
SBI Chairman Dinesh Khara said that this issuance will help in developing a long-term bond curve and encourage other banks to issue bonds of longer tenor.
The coupon of 7.36 represents a spread of 21 bps over the corresponding government bond yield curve. The instrument is rated AAA with stable outlook. Earlier, it had placed a 15-year infrastructure bond at a coupon of 7.49 per cent in September 2023.
The current issue was oversubscribed by about four times the base issue size of Rs 5,000 crore. The total number of bids received was 143 indicating wider participation with heterogeneity of bids. The investors were across provident funds, pension funds, insurance companies, mutual funds, corporates, SBI said.
The proceeds of bonds will be utilised in enhancing long term resources for funding infrastructure and affordable housing segments. The board of bank has already approved plans for raising up to Rs 20,000 crore through long-term bonds in the current financial year.
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The money raised through infrastructure bonds is exempt from regulatory reserve requirements like Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). The entire amount can be deployed in lending operations. When banks raise money through deposits, they have to keep 4.5 per cent of the amount with the Reserve Bank of India as CRR. Also, they have to invest about 18 per cent of money into securities to maintain SLR.
According to an analyst presentation, SBI’s infrastructure loans rose by 5.72 per cent year-on-year (YoY) basis to Rs 3.94 trillion at the end of March 2024. The share of infrastructure credit in the outstanding loan book was 12.23 per cent. Out of Rs 3.94 trillion portfolio, key exposures were the power sector (Rs 2.04 trillion), ports and roads (Rs 1.12 trillion) and telecom (Rs 30,376 crore).
Investments in India’s key infrastructure sectors, renewable energy and roads and real estate are pegged to grow 38 per cent in the financial years 2025 and 2026, compared with the previous two financial years, to Rs 15 trillion, according to CRISIL Ratings.
The government has introduced various initiatives to strengthen the economy, such as the National Infrastructure Pipeline (NIP) with targeted investments of $1.4 trillion and the National Monetisation Pipeline (NMP). The need to ramp up infrastructure on a large and sustainable scale has resulted in new projects, particularly in sectors such as renewables, roads, city gas distribution, SBI said in its annual report for FY24.
State Bank of India infrastructure bond issuances in last 18 months
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