SBI to raise up to Rs 20,000 cr via long-term bonds to fund infra projects

The bonds to be issued in tranches depending on market conditions

State Bank of India (SBI), the country's largest lender, plans to raise up to Rs 20,000 crore through long-term bonds in the current financial year for funding infrastructure projects and affordable housing units.

In a filing with stock exchanges, the lender said its central board had, at its meeting on Wednesday, approved issuing long-term bonds to raise up to Rs 20,000 crore through a public issue or private placement during 2024-25.

A senior SBI executive said the infrastructure bonds would be issued in tranches depending on market conditions. The bank had raised Rs 20,000 crore in each of two previous financial years (FY23 and FY24). In September last year, it had placed a 15-year infrastructure bond at a coupon of 7.49 per cent.

The bank has already announced plans to raise up to $3 billion of long-term funds from the international market through a public offer and/or private placement of senior unsecured notes in US dollar or any other major foreign currency in the current financial year.

The infrastructure bonds issued earlier by SBI carry an AAA credit rating by domestic credit-rating agencies with a stable outlook. The proceeds from infrastructure bonds are exempt from regulatory reserve requirements like statutory liquidity ratio (SLR) and cash reserve ratio (CRR). The entire amount can be deployed in lending operations.

If banks were to raise similar amounts through deposits, they would have to keep 4.5 per cent of the amount with the Reserve Bank of India as CRR. Also, they have to invest about 18 per cent of money into securities to maintain SLR.

SBI’s infrastructure loans rose 5.72 per cent year-on-year (Y-o-Y) to Rs 3.94 trillion at the end of March 2024. Of this, major exposures were to the power sector (Rs 2.04 trillion), ports and roads (Rs 1.12 trillion) and telecom (Rs 30,376 crore).

In its annual report for FY24, SBI said the government had further raised its budgetary allocation towards capital expenditure from Rs 10 trillion in FY24 to Rs 11.11 trillion for the current financial year.

The Government of India has introduced various initiatives to strengthen the economy, such as the National Infrastructure Pipeline (NIP) with targeted investments of $1.4 trillion, the National Monetisation Pipeline (NMP), and Performance-linked Schemes (PLI). The need to ramp up infrastructure on a large and sustainable scale has resulted in new projects, particularly in sectors such as renewables, roads, and city gas distribution.

Investments in India’s key infrastructure sectors — renewable energy and roads – and real estate in FY25 and FY26 are pegged to grow about 38 per cent over the previous two financial years to Rs 15 trillion, according to CRISIL Ratings.

The path ahead

-A senior SBI executive said the infrastructure bonds would be issued in tranches depending on market conditions
 

- The bank had raised ~20,000 crore in each of two previous financial years (FY23 and FY24)
 

- In September last year, it had placed a 15-year infrastructure bond at a coupon of 7.49%
 

- The infra bonds issued earlier by SBI carry an AAA credit rating by domestic credit-rating agencies with a stable outlook
 

- The proceeds from infra bonds are exempt from regulatory reserve requirements like statutory liquidity ratio and cash reserve ratio