State-owned Bank of Baroda on Monday inflation Rs 5,000 crore through 10-year infrastructure bonds at a coupon rate of 7.3 percent, according to sources aware of the development.
The offering of the bonds, rated AAA by Crisil Ratings, had a base issue size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore and was fully subscribed.
A dealer at a state-owned bank said yields on 10-year government securities have fallen, resulting in lower cut-off rates for BoB compared to State Bank of India (SBI), the country’s largest lender. Generally, SBI is considered like a barometer for the Indian economy and has to pay the lowest coupon rate.
The cut-off rates for future infrastructure bond issues are expected to be between 7.3 percent to 7.35 percent for state-owned banks and 7.35 percent to 7.4 percent for private banks, the dealer said.
Banks, especially state-owned banks, have recently moved towards raising funds through infrastructure bonds. SBI raised Rs 20,000 crore in two tranches through 15-year infrastructure bonds at 7.36 percent interest rate. The first tranche of Rs 10,000 crore was raised in June, the second tranche was raised in July.
Canara Bank raised Rs 10,000 crore through 10-year infrastructure bonds at 7.4 percent, while Bank of India raised Rs 5,000 crore through 10-year instruments at 7.54 percent.
Meanwhile, Bank of Maharashtra earlier this month raised Rs 811 crore by issuing 10-year infrastructure bonds at a coupon rate of 7.8 percent. The base size of the issue was Rs 500 crore and the greenshoe option was Rs 2,500 crore.
Cumulatively, state-owned banks have raised Rs 35,811 crore in the last few months through infrastructure bonds.
Infrastructure bonds have a tenure of at least seven years and the amount received is used by banks to finance long-term infrastructure projects.
