Bank of Maharashtra likely to sell Rs 1000 crore of AT-1 bonds

Over the last couple of weeks, banks have made a beeline to raise funds by issuing debt instruments

State-owned Bank of Maharashtra is likely to issue up to Rs 1,000 crore worth of additional tier-1 (AT-1) bonds in coming days, sources said.

The bonds, which are likely to have a call option after 5 years from allotment, have been rated AA by Acuite Rating and Infomerics Ratings. On December 6, Bank of Maharashtra had raised Rs 348 crore through the sale of tier-2 bonds on a private placement basis at a coupon—the rate of interest paid to the investor—of 8 per cent.

The Pune-based lender had last tapped debt capital markets through AT-1 bonds in September, raising capital worth Rs 710 crore at a coupon of 8.74 per cent. Before that the bank had issued Rs 290 crore worth of AT-1 bonds in March at 8.75 per cent.

Over the last couple of weeks, banks have made a beeline to raise funds through the issuance of debt instruments such as tier-2 bonds, AT-1 bonds and infrastructure bonds.

The large-scale fund-raising comes at a time when bank credit growth outstrips deposit, exerting pressure to mobilise money.

Latest RBI data showed that as on November 18, bank credit growth was at 17.2 per cent year-on-year, while deposit growth was at 9.6 per cent.

“Credit offtake remained elevated at 17.2% y-o-y, reporting robust growth for the fortnight ended November 18, 2022. The growth is driven by NBFCs, retail credit, inflation-led working capital demand, and a lower base,” credit rating agency Care Edge wrote.