ICICI Bank could raise upto Rs 10,000 crore through infrastructure bonds for project financing and affordable housing.
These long-term bonds have the advantage of not needing to maintain statutory liquidity requirements and cash reserve ratios (CRR) (SLR).
By doing this, they are able to lessen the asset-liability management (ALM) issues they run into when they lend project loans to the infrastructure and core business sectors. According to sources in the bond market, depending on requirements and market conditions, these bonds could be issued in one or more tranches.
ICRA, a ratings agency, has given the proposed infrastructure bond issuance by ICICI Bank a “AAA” grade.
In August, Bank of Baroda also had these bonds of Rs 1,000 crore at a rate of 7.39 per cent. It is authorised to sell these notes in order to raise upto Rs 5,000 crore.
The long-term infrastructure bonds should have a minimum maturity of seven years. Before obtaining funding through bonds, banks must first help fund such infrastructure projects.
The Reserve Bank of India (RBI) also permits the exclusion of funds obtained through long-term bonds for financing infrastructure and affordable housing from adjusted net bank credit. With an increase in capital spending to support economic growth, the infrastructure sector, including roads, ports, and power, has also witnessed an increase in investment and lending.
In July 2022, bank sector loans to the infrastructure industry increased by 11.1 per cent annually to Rs 12.14 trillion.
According to data from the RBI, bank lending to the infrastructure industry was flat in 2018 and only increased by 0.3 per cent in July 2021. The power industry receives 6.27 trillion rupees worth of the sector’s loans, which is followed by the roads sector (Rs 2.79 trillion).