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Canara Bank plans to raise Rs 10K cr through infrastructure bonds in FY25

A Canara Bank official said it expects to raise part of this amount this quarter (Q2FY25) itself, subject to market conditions. It is part of the efforts to diversify sources of funding

Canara bank

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Abhijit Lele Mumbai

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Public sector lender Canara Bank plans to raise up to Rs 10,000 crore through infrastructure bonds for lending to projects in areas like roads, power and ports, among others, this financial year (FY25).

It is the third state-owned lender, after State Bank of India (SBI) and Bank of India, who spelt out plans to tap this route in the current financial year.

SBI plans to raise up to Rs 20,000 crore out of which it raised Rs 10,000 crore in June 2024. Bank of India is raising up to Rs 10,000 crore.

A Canara Bank official said it expects to raise part of this amount this quarter (Q2FY25) itself, subject to market conditions. It is part of the efforts to diversify sources of funding.

CRISIL and CareEdge Ratings have assigned an "AAA" rating for Canara Bank's infrastructure bonds.

Canara had raised Rs 10,000 crore via infrastructure bonds in 2023-24.

It raised amounts through two tranches of 10-year bonds at coupon rates of 7.54 per cent (Rs 5,000 crore) and 7.68 per cent (Rs 5,000 crore) in FY24. 

The Bengaluru-based lender’s credit to the infrastructure sector rose by 12 per cent year-on-year (Y-o-Y) at Rs 1.29 trillion as end of March 2024.

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.

When banks raise money through deposits, they have to keep 4.5 per cent of the amount with the Reserve Bank of India (RBI) as CRR.

Also, they have to invest about 18 per cent of the money into securities to maintain SLR. Bond money is also subtracted from the loan book for calculation of priority sector lending obligation of the bank.

Investments in India’s key infrastructure sectors, renewable energy, roads and real estate, are pegged at Rs 15 trillion for financial years FY25 and FY26, according to CRISIL Ratings.

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First Published: Jul 09 2024 | 7:30 PM IST

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