SBI likely to raise up to Rs 10,000 cr via infra bonds

economictimes.indiatimes.com:

State Bank of India, the country's largest lender, is likely to carry out a sale of infrastructure bonds worth up to ₹10,000 crore around the end of this month, as it seeks to raise long-term capital amid healthy demand for credit. The bank is likely to issue 15-year infrastructure bonds with a base size of ₹5,000 crore and a green shoe option of ₹5,000 crore, sources close to the development said. In January, SBI had issued infrastructure bonds with a 15-year maturity, marking the first time that an Indian bank had sold such bonds in that maturity bracket.

«They (SBI) wish to develop the long-term curve in the infra bond market, that is why they are considering the 15-year maturity bracket again,» a source said. «As the largest player in the banking space, they feel that more issuances in the 15-year infrastructure bracket would encourage more fund-raising in the longer-maturity segment which would lead to better price discovery for infrastructure financing,» the source said. Infrastructure bonds are long-term debt instruments with a maturity of at least seven years.

Given that these instruments are used for providing finance to the infrastructure sector, banks do not have to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on them, according to Reserve Bank of India norms. At present, the CRR is at 4.5% of net demand and time liabilities, a proxy for deposits. The SLR, is at 18%.