Bank of India plans to raise up to Rs 5,000 crore via infra bonds

Public sector lender Bank of India (BOI) is planning to raise up to Rs 5,000 crore through infrastructure bonds, days after the State Bank of India’s (SBI’s) infrastructure bonds issuance.

BOI officials said rating agency India Ratings has assigned “AA+” rating to the proposed infra bond offering. The capital raising committee will meet later this week to finalise the fundraising plan. The actual amounts raised and the timing would depend on market conditions.

According to BOI officials, finer rates of SBI fund-raise coupled with the growing demand for funds by renewable energy firms and affordable housing, prompted the state-run lender to look at infra bonds. 

BOI’s infrastructure loan book stood at Rs 58,860 crore at the end of March 2024.

SBI had raised Rs 10,000 crore through 15-year infrastructure bonds at a coupon of 7.36 per cent.

The money raised through infrastructure bonds is exempt from regulatory reserve requirements like Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).

The entire amount can be deployed in lending operations. When banks raise money through deposits, they have to keep 4.5 per cent of the amount with the Reserve Bank of India as CRR. They also have to invest about 18 per cent of money into securities to maintain SLR.

Investments in India’s key infrastructure sectors, renewable energy and roads and real estate are pegged to grow 38 per cent in the financial years 2025 and 2026, compared with the previous two financial years, to Rs 15 trillion, according to CRISIL Ratings.