The Bank of India intends to issue infrastructure bonds for Rs 5,000 crore the following week. Sources claim that the 10-year infrastructure bonds will have a base amount of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore.
The bank board had approved raising Rs 10,000 crore for infrastructure projects in 2024–2025 through long-term infra bonds. In July, the bank raised Rs 5,000 crore through fully subscribed 10-year infra bonds with a coupon of 7.54%. The lender, the sixth-biggest public sector bank, has a credit pipeline of over Rs 70,000 crore, of which approximately Rs 15,000 crore is for infrastructure.
The largest lender in the nation, SBI, raised Rs 10,000 crore earlier this week when it issued its eighth infrastructure bond at a coupon rate of 7.23%. With this issuance, the bank has raised Rs 30,000 crore in infra bonds this fiscal year, bringing the total amount of long-term bonds outstanding to Rs 59,718 crore.
Banks use the money raised via infrastructure bonds with a minimum seven-year tenor to finance long-term infrastructure projects. According to bankers, issuing infrastructure bonds is a more cost-effective way to raise money in the current environment, where banks are having trouble attracting deposits. Infrastructure bonds are not subject to the same regulatory requirements as funds raised through Certificates of Deposit (CDs), which require banks to maintain a Cash Reserve Ratio (CRR).
Because of this exemption, infrastructure bonds are a more attractive and effective way for banks to raise the money they need. Because the CRR and SLR regulations limit the amount of money that may be used for revenue-generating operations, they increase the cost of CDs and retail deposits for banks. According to bankers, the need for financing is driven by government spending on infrastructure and growing investment in industries like steel, highways, and renewable energy.
