Bank of Baroda could raise up to Rs 5,000 crore through infrastructure bonds in the coming days

Bank Baroda is likely to raise up to Rs 5,000 crore through the issuance of infrastructure bonds in the coming days as the state-run lender looks to raise long-term funds amid a firm financial situation. demand for credit.

The bank may conduct the debt sale on September 6, and the issue is likely to have a base size of Rs 2,000 crore and a call option of Rs 3,000 crore, debt capital market According to sources, the bonds are likely to have a maturity of 10 years.

Last week, the state-run bank had raised Rs 5,000 crore through 10-year infrastructure bonds at a coupon (or interest rate) of 7.30%. Earlier in July, the board of directors of Bank of Baroda had approved raising funds worth Rs 10,000 crore through issuance of long-term bonds to finance infrastructure projects during the current financial year.

Infrastructure bonds have a minimum maturity of seven years.

For banks, infrastructure bonds have an advantage, as 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, forcing lenders 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 FY25, 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% year-on-year, while credit growth was 15.0%, the latest data released by the Reserve Bank of India showed.