The bank is likely to issue 15-year infrastructure bonds with a base size of ₹5,000 crore and a green shoe option of ₹5,000 crore, sources close to the development said.
In January, SBI had issued infrastructure bonds with a 15-year maturity, marking the first time that an Indian bank had sold such bonds in that maturity bracket.
“They (SBI) wish to develop the long-term curve in the infra bond market, that is why they are considering the 15-year maturity bracket again,” a source said.
“As the largest player in the banking space, they feel that more issuances in the 15-year infrastructure bracket would encourage more fund-raising in the longer-maturity segment which would lead to better price discovery for infrastructure financing,” the source said.
Infrastructure bonds are long-term debt instruments with a maturity of at least seven years. Given that these instruments are used for providing finance to the infrastructure sector, banks do not have to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on them, according to Reserve Bank of India norms.
At present, the CRR is at 4.5% of net demand and time liabilities, a proxy for deposits. The SLR, is at 18%.In June, Kotak Mahindra Bank had raised funds worth ₹1,895 crore through the issuance of infrastructure bonds.SBI’s plan to issue infrastructure bonds comes after the lender raised ₹3,101 crore through the issue of perpetual, or additional tier-1 (AT-1), bonds last week at a rate of 8.10%. That issuance marked the first sale of AT-1 bonds by an Indian bank after the Credit Suisse crisis in March.
Following Credit Suisse’s collapse, investors holding the bank’s perpetual bonds suffered losses as the securities were written off. In case of adverse events for a bank, AT-1 bonds can be written off before equity.