CRISIL has assigned an ‘AA\Stable’ rating to the proposed infrastructure bonds. | File Photo
Public sector lender Punjab & Sind Bank (PSB) plans to raise up to Rs 3,000 crore through infrastructure bonds as a cost-effective means amid stiff competition for deposits.
Banks, especially state-owned ones, have been actively raising funds through infrastructure bonds in the current financial year. The country’s largest lender, State Bank of India, raised Rs 20,000 crore in two tranches through 15-year infrastructure bonds in June and July. Also, Bengaluru-based public sector lender Canara Bank raised Rs 10,000 crore through 10-year infrastructure bonds at 7.4 per cent, and Bank of India raised Rs 5,000 crore through 10-year instruments at 7.54 per cent in July.
Swarup Kumar Saha, managing director and CEO of PSB, told Business Standard that the decline in bond yields is creating a conducive environment for raising funds at relatively lower rates. “The bonds will be issued in tranches. In the first instance, the bank is looking to raise up to Rs 3,000 crore, depending on market conditions.”
CRISIL has assigned an “AA\Stable” rating to the proposed infrastructure bonds.
Overall, domestic bond yields moderated in August and September (till September 17). The benchmark 10-year Indian government securities (G-sec) yield moved within a narrow range of 6.76-6.87 per cent, according to the State of the Economy report published in the Reserve Bank of India’s monthly bulletin (September 2024).
Funds raised through infrastructure bonds are attractive from a bank’s point of view as they are exempt from regulatory reserve requirements such as the statutory liquidity ratio (SLR) of 18 per cent and the cash reserve ratio (CRR) of 4.5 per cent. They are also exempt from priority sector lending (PSL) requirements.
The bank has approvals for a total fundraising of around Rs 10,000 crore. This includes a qualified institutional placement (QIP) for an equity offer of Rs 2,000 crore, Rs 5,000 crore in infrastructure bonds and Rs 3,000 crore in additional Tier 1 and Tier 2 bonds.
The bank is in the process of appointing merchant bankers for the proposed QIP, Saha said. However, he did not indicate the timing of the share offering.
PSBs’ infrastructure loan portfolio expanded 16.65 per cent year-on-year (YoY) to Rs 15,274 crore as of June 2024, accounting for around 19.02 per cent of its total credit. Of this, the power segment held the highest share at Rs 5,462 crore, followed by roads and ports at Rs 3,390 crore, according to an analyst presentation for Q1FY25.
First published: September 22, 2024 | 14:41 IS
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