SBI raises Rs 10,000 cr via infra bonds

The bonds have a coupon rate of 7.36 percent. With this issuance, SBI’s total outstanding long-term bonds now amount to Rs 49,718 crore.

SBI Chairman Dinesh Khara stated that this issuance would help develop a long-term bond curve and encourage other banks to issue bonds with longer tenors.

The 7.36 percent coupon represents a 21 basis points spread over the corresponding government bond yield curve.

The bonds are rated AAA with a stable outlook. Previously, in September 2023, SBI issued a 15-year infrastructure bond at a coupon rate of 7.49 percent.

The current issue was oversubscribed by about four times the base issue size of Rs 5,000 crore, receiving 143 bids, indicating wide participation and a diverse range of bids.

Investors included provident funds, pension funds, insurance companies, mutual funds, and corporates.

The proceeds from the bonds will be used to augment long-term resources for funding infrastructure and affordable housing projects.

The bank's board has already approved plans to raise up to Rs 20,000 crore through long-term bonds in the current financial year.

Funds raised through infrastructure bonds are exempt from regulatory reserve requirements such as the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR), allowing the entire amount to be used for lending operations.

In contrast, when banks raise money through deposits, they must keep 4.5 percent with the Reserve Bank of India as CRR and invest about 18 percent in securities to maintain the SLR.