ICICI Bank may raise Rs 1,000 cr via infra bonds

The lender is planning to issue 10-year bonds worth Rs 500 cr with an equal over-allotment option, people familiar with the development

Following the Reserve Bank of India's move to exempt cash reserve ratio and statutory liquidity ratio on funds raised via long-term infrastructure bonds, ICICI Bank, the country's largest private sector bank, is planning to raise Rs 1,000 crore of funds by issuing such papers.

The lender is planning to issue 10-year bonds worth Rs 500 crore with an equal over-allotment option, people familiar with the development told Business Standard. The coupon rate of these semi-annual, 10-year bonds is likely to be 9.15 per cent.

Other private sector lenders such as Axis Bank and YES Bank have also announced that they will be raising money via long-term bonds in the coming months. YES Bank plans to raise Rs 3,000 crore in the next 12 months. Axis Bank management said they are yet to finalise details.

Sources said, initially, ICICI Bank is testing the market with a smaller issue and might raise more money later, depending on the market appetite. An email sent to ICICI Bank remained unanswered.

This comes after the Reserve Bank of India (RBI) incentivised banks to raise long-term bonds by relaxing the norms. The central bank had said that funds raised via long-term bonds (tenor of more than seven years) will be exempt from cash and statutory reserve requirements if the proceeds are used to fund new long-term infrastructure projects and affordable housing. Also, the loans funded via this process will be exempt from the computation of adjusted net bank credit for the purpose of calculating priority sector lending requirements.

Experts believe the money raised by the banks will be used to further grow its housing loan portfolio. The lender has been aggressively building its home loan book and has expanded it by 22.5 per cent by the end of March, from a year ago.

At the end of March, the home loan book stood at Rs 709, half the total retail advances. The total retail finance portfolio at the end of 2013-14 was Rs 14,118 crore.