Bank of India is planning to raise Rs 5,000 crore via infrastructure bonds next week. The 10-year infrastructure bonds will have a base size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore, according to sources.
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The bank board had given approval to raise Rs 10,000 crore through long-term infra bonds in 2024-25 to fund infrastructure projects. In July, the bank had raised Rs 5,000 crore through 10-year infra bonds at a coupon of 7.54%, which was fully subscribed. The lender, which is the sixth-largest public sector bank, has a credit pipeline of over Rs 70,000 crore out of which the infrastructure pipeline is of nearly Rs 15,000 crore.
Earlier this week, the country’s largest lender SBI had raised Rs 10,000 crore through its seventh infrastructure bond issuance at a coupon rate of 7.23%. With this issuance, the bank has raised Rs 30,000 crore in infra bonds this fiscal, taking long-term bonds outstanding to Rs 59,718 crore.
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Infrastructure bonds have a tenor of at least seven years and the proceeds are utilised by banks to fund long-term infrastructure projects. Bankers say that in the present scenario, where attracting deposits has become difficult for banks, raising funds through infrastructure bonds offers a more economical alternative. Unlike funds raised through Certificates of Deposit (CDs), which mandate banks to maintain a Cash Reserve Ratio (CRR), infrastructure bonds are exempt from this regulatory obligation. This exemption makes infrastructure bonds a more appealing and efficient option for banks to acquire the required funding. The CRR and SLR requirements make CDs and retail deposits more expensive for banks because they reduce the portion of funds that can be used for income-generating activities. Bankers say that government spending on infrastructure and increased investment in sectors such as steel, roads, and renewable energy are driving demand for funds.
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