Axis Bank and Indian Bank mulling infrastructure bond route to raise funds next month

Axis Bank and Bank of India They are likely to raise funds worth up to Rs 9,000 crore through infrastructure bond sale next month as lenders continue to rely on debt issuances to mobilise funds amid slower pace of deposit growth than credit growth.

Private sector lender Axis Bank’s infrastructure bond sale is likely to have a base size of Rs 2,000 crore and a call option of Rs 2,000 crore, debt capital market Executives said the bonds will likely mature in 10 years.

Meanwhile, state-run lender Indian Bank could tap the debt market by mid-September, the sources said.

“Axis Bank’s issue could hit the market next week, while Indian Bank has been rated Rs 5,000 crore. Bond market conditions are favourable with sovereign bond yields anchored due to surplus liquidity “There is a lot of activity in the infrastructure sector and banks are turning to infrastructure bonds to finance it,” one source said.

For banks, infrastructure bonds have an advantage: funds obtained through these securities are exempt from the regulatory requirement to maintain Cash reserve ratio (CRR) and Regulatory liquidity ratio (SLR). Over the past two years, bank credit growth has consistently outpaced deposit growth, due to which lenders have been forced to mobilise funds through higher deposit rates or issuances of debt instruments. In this scenario, infrastructure bonds help banks manage their interest rate spreads more efficiently as waivers of reserve requirements for these instruments reduce the cost of funds. So far in the current financial year, banks have issued infrastructure bonds worth around Rs 43,500 crore, Treasury executives said. The country’s largest lender State Bank of India has led the pack with total infrastructure bond issuances worth Rs 20,000 crore so far in FY25. As of August 9, bank deposit growth was 11.3 per cent year-on-year, while credit growth was 15.0 per cent, the latest data released by the Reserve Bank of India showed.