Bank of Baroda may raise up to Rs 5,000 crore through infra bonds in coming days

The bank may conduct the debt sale on September 6, with the issuance likely to have a base size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore, debt capital market sources said. The bonds are likely to be of 10-year maturity.

Last week, the state-owned bank had raised Rs 5,000 crore through 10-year infrastructure bonds at a coupon – or rate of interest – of 7.30%. In early July, Bank of Baroda’s board had approved raising of funds worth Rs 10,000 crore through the issuance of long-term bonds for financing of infrastructure projects during the current financial year.

Infrastructure bonds have a minimum maturity of seven years.

For banks, infrastructure bonds come with an advantage as funds raised through these securities are exempt from the regulatory requirement of maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).With bank credit growth persistently outstripping deposit growth over the past couple of years, lenders have been compelled to mobilise funds through higher deposit rates or issuances of debt instruments. In this scenario, infrastructure bonds help banks manage their interest rate margins more efficiently as the exemptions from reserve requirements for these instruments bring down 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 on August 9, bank deposit growth was at 11.3% year-on-year while credit growth was at 15.0%, latest data released by the Reserve Bank of India showed.