The State Bank of India (SBI) has raised Rs 10,000 crore in 15-year infrastructure bonds to fund projects in areas such as power and highways. The coupon rate for bonds is fixed at 7.36%.
The issuance was nearly four times larger than its basic size of Rs 5,000 crore. Previously, it issued a 15-year infrastructure bond with a coupon of 7.49 percent in September 2023, raising Rs 10,000 crore.
This coupon of 7.36% represents a 21 basis point spread over the equivalent Government bond curve. The instrument is rated AAA, with a stable outlook. SBI said in a statement that the total outstanding Long-Term Bonds issued by the bank is Rs 49,718 crore, including the present offering.
SBI chairman Dinesh Khara stated that this issuance will contribute to the development of a long-term bond curve and encourage other banks to issue bonds with longer maturities. The overall number of bids received was 143, demonstrating widespread involvement with a variety of proposals. The investors included provident funds, pension funds, insurance firms, mutual funds, and corporations, among others.
Bond proceeds will be used to increase long-term funding for infrastructure and affordable housing segments. The bank's board has already approved plans to raise up to Rs 20,000 crore through long-term bonds during the current fiscal year. The latest auction has raised Rs 10,000 crore.
Infrastructure bonds' proceeds are free from regulatory reserve requirements such as the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). The entire sum can be used for loan operations. If banks raise equal amounts from deposits, they must hold 4.5% of the proceeds with the Reserve Bank of India as CRR. In addition, to maintain SLR, companies must invest approximately 18% of their money in securities.
State Bank of India infrastructure bond issuances in the recent 18 months:
