Banks raised record Rs 40,895 crore through infra bonds in Apr-Nov

Five banks have raised Rs 40,895 crore through infrastructure bonds till November in the financial year 2023-24 (FY24), which is double the amount raised through such bonds in the whole of FY23.

The country’s largest lender, State Bank of India (SBI), accounted for almost half of the amount mopped up via infrastructure bonds in the eight months of FY24.

Ajay Manglunia, managing director and head of the investment grade group at J M Financial Services, said the demand for credit from the infra front had encouraged banks to raise long-term efficient capital by issuing infra bonds. Spreads are also much better on sovereign paper with longer tenors compared to last year.

This time more large public-sector banks, like SBI, Canara Bank (Rs 10,000 crore), and Bank of Baroda (Rs 5,000 crore), have accounted for 88 per cent of the fundraise through infra bonds. Two private lenders — ICICI Bank and Kotak Mahindra Bank — raised Rs 4,000 crore and Rs 1,895 crore, respectively.

As for the issuance of debt capital in April-November, the bank raised Rs 24,976 crore through additional tier I (AT1 bonds) and tier II bonds. Banks raised Rs 6,101 crore through AT1 bonds. SBI raised Rs 3,000 crore, and Delhi-based Punjab National Bank raised Rs 3,101 crore via AT1 bonds.

The capital raised through tier II bonds was three times higher than through AT1 bonds. Eight banks raised Rs 18,875 crore through tier II bonds. SBI issued tier II bonds for Rs 10,000 crore, followed by PNB (Rs 3,090 crore) and Bank of India (Rs 2,000 crore).