Bank of Baroda (BoB), one of the country’s largest state-owned banks, has successfully raised ₹5,000 crore through 10-year infrastructure bonds at a coupon rate of 7.3%. The bond issue, rated AAA by CRISIL Ratings, had a base size of ₹2,000 crore, with a greenshoe option of ₹3,000 crore, and was fully subscribed.
The offering saw strong demand, particularly from pension funds favouring long-term bonds, reflecting the market’s confidence in BoB’s financial stability. The yield on 10-year government securities has declined, resulting in a lower cut-off rate for BoB than other major state-owned banks, including the State Bank of India (SBI), which typically sets the benchmark for such issuances.
Infrastructure bonds, exempt from regulatory reserve requirements like the statutory liquidity ratio (SLR) and cash reserve ratio (CRR), are highly attractive for banks. This exemption allows banks to deploy the full amount raised into lending activities, unlike funds from deposits, which require a portion to be held as CRR and SLR.
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This issuance is part of a broader trend among state-owned banks to raise funds through infrastructure bonds. Recently, SBI raised ₹20,000 crore in two tranches through 15-year infrastructure bonds at 7.36%, Canara Bank raised ₹10,000 crore at 7.4%, and Bank of India raised ₹5,000 crore at 7.54%. Bank of Maharashtra also issued ₹811 crore in 10-year infrastructure bonds at 7.8% earlier this month.
In the past few months, state-owned banks have raised ₹35,811 cr through infrastructure bonds, signalling a robust focus on funding long-term infrastructure projects.
