State Bank of India to sell Rs 10,000 cr worth of infra bonds by Nov-end

State Bank of India is likely to issue infrastructure bonds for the third time this year before the end of this month, two sources with direct knowledge of the matter said, as demand for credit by steel, roads and renewable energy remains strong.

 

The country's largest lender is likely to raise up to 100 billion rupees ($1.19 billion) through yet another 15-year bond issue, the sources said, declining to be identified as they are not authorised to speak to media. 

Earlier in the day, SBI's board approved a bond issue but did not disclose details. The lender did not immediately reply to a Reuters email seeking comment. 

 

Infrastructure bonds are used to finance long-term development projects. 

The Indian economy's projected 7.2% growth this financial year is expected to be driven by, among other things, government spending on infrastructure. 

This has led banks to issue a record 591 billion rupees in infrastructure bonds so far this year, compared with 574 billion rupees last fiscal year. 

SBI's infrastructure loans jumped 8.86% in the July-September quarter and it currently has over 4 trillion rupees of outstanding loans in this sector. 

It expects more demand for such credit. 

"We have a significant infrastructure book and there is a good amount of interest from investors for this particular instrument (infrastructure bonds)," Chairman CS Setty said in a media conference. 

He noted their use in managing key financial requirements, such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR), which the central bank uses to regulate banking system liquidity. 

"Infrastructure bonds have certain advantages in terms of CRR, SLR exemptions. It is a good instrument when we have a large infrastructure book. We have been consistently getting a good price in the market compared to other institutions. It makes sense both in terms of efficiency of liabilities and pricing." 

SBI raised 100 billion rupees via 15-year infrastructure bonds at a coupon of 7.36% in July, a month after it raised 100 billion rupees at the same coupon rate. 

Last financial year, it raised 200 billion rupees through two tranches of 15-year infrastructure bonds at coupon rates of 7.54% and 7.49%. 

"The bank is satisfied with the pricing that it receives for infra bonds and hence, has decided to go ahead with another issue," one of the sources mentioned above said.