Punjab & Sind Bank plans to raise Rs 3,000 cr from infra bonds this month

State-owned Punjab & Sind Bank plans to raise Rs 3,000 crore from maiden infrastructure bonds this month as part of exercise to raise resources to expand loan book.

"We have taken board approval for raising Rs 5,000 crore from infrastructure bonds in tranches. As against that, the bank proposes to raise Rs 3,000 crore in the first tranche," Punjab & Sind Bank Managing Director and CEO Swarup Kumar Saha said.

Asked about the timing of fundraise, he said, it would be tentatively in the third week of this month.

The base issue size is going to be Rs 500 crore, with a greenshoe option of Rs 2,500 crore.

In accordance with RBI guidelines, these papers would have a tenure of 10 years. They have been rated as 'AA' by domestic rating agencies.

The bank proposes to utilise the proceeds in the next two quarters. These bonds would be listed on the National Stock Exchange (NSE) for trading.

The bank is aiming at the credit growth of 13-14 per cent during the current financial year.

Domestic investors have shown a lot of interest in such bond issuance by banks and many lenders have exercised this option for raising resources in the recent past.

The advantage of infrastructure bonds is that they are exempt from regulatory reserve requirements such as the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). So, infrastructure bond proceeds can be fully deployed for lending activities.

Banks have been preferring infrastructure bonds over AT-1 and Tier-2 bonds, as they are better priced.

For the second quarter ended September 2024, Punjab & Sind Bank reported a 26 per cent rise in net profit to Rs 240 crore on the back of reduction in bad loans.

The lender had recorded a net profit of Rs 189 crore in the same quarter a year ago.

Total income increased to Rs 3,098 crore during the quarter under review from Rs 2,674 crore a year earlier.

The bank earned an interest income of Rs 2,739 crore during the quarter, compared to Rs 2,406 crore in the same period a year ago.

Asset quality of the bank improved with gross non-performing assets declining to 4.21 per cent of the gross loans by the end of September 2024 from 6.23 per cent a year ago.

Similarly, net NPAs, or bad loans, eased to 1.46 per cent from 1.88 per cent at the end of the second quarter of the previous fiscal year.