 "Punjab & Sind Bank")
Public sector lender Punjab and Sind Bank is planning to raise up to Rs 3,000 crore through infrastructure bonds as a cost effective means amid stiff challenge of competition for deposits.
Banks, especially state-owned banks, have been active to raise funds through infrastructure bonds till date in the current financial year.
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Country’s largest lender State Bank of India (SBI) raised Rs 20,000 crore in two tranches through 15-year infra bonds in June and July.
Also Bengaluru-based public sector lender Canara Bank raised Rs 10,000 crore through 10-year infrastructure bonds at 7.4 per cent. And, Bank of India raised Rs 5,000 crore through 10-year instruments at 7.54 per cent in July.
Swarup Kumar Saha, managing director (MD) and chief executive (CEO), Punjab and Sind Bank, told Business Standard that softening of bond yields is creating a conducive atmosphere for raising funds at relatively lower rates.
He added, “The bonds will be issued in tranches. In the first instance, the bank intends to raise up to Rs 3,000 crore depending on market conditions.”
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CRISIL has assigned “AA\Stable” rating to the proposed infrastructure bonds of the bank.
The domestic bond yields softened in August and September (up to September 17). Yield on the 10-year Indian benchmark government security (G-sec) moved in a narrow range of 6.76 - 6.87 per cent, according to the State of Economy report in the Reserve Bank of India’s (RBI’s) monthly bulletin (September 2024).
Funds raised through infrastructure bonds are attractive from a bank’s point of view since they are exempt from regulatory reserve requirements such as the statutory liquidity ratio (SLR) of 18 per cent and cash reserve ratio (CRR) of 4.5 per cent. They are also exempt from priority sector lending (PSL) requirements.
Punjab and Sind Bank has approvals in place for overall fundraise of around Rs 10,000 crore. This includes qualified institutional placement (QIP) for equity offering of Rs 2,000 crore, Rs 5,000 crore of infra bonds and Rs 3,000 crore of additional Tier 1 and Tier 2 bonds.
The bank is in the process of appointing merchant bankers for the proposed QIP, Saha said. However, he did not indicate the timing for equity share offering.
Its infrastructure loan book expanded by 16.65 per cent year-on-year (Y-o-Y) to Rs 15,274 crore in June 2024, which is about 19.02 per cent of the total credit.
Of this credit, the energy segment had the highest share with Rs 5,462 crore, followed by roads and ports at Rs 3,390 crore, according to an analyst presentation for Q1 FY25.
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