Bank Of Baroda Raises Rs 5,000 Crore By Selling Infra Bond At 7.30%

Bank of Baroda raised Rs 5,000 by selling 10-year infrastructure bonds at a coupon of 7.30%, according to people with knowledge about the matter.

The issue, with a base size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore, was fully subscribed. The bonds are rated 'AAA' by Crisil Ratings.

The state-owned bank issued these 10-year bonds at a competitive rate as market participants were expecting a cutoff rate of around 7.32–7.34%, the above-mentioned people told NDTV Profit.

In fact, the State Bank of India's 15-year infrastructure bonds were trading at around 7.31–7.32% in the secondary market. This demonstrates the attractive pricing of the Bank of Baroda's bonds. In the corporate bond market, SBI is the benchmark for other banks' bonds.

The last time Bank of Baroda entered the infrabond market was in January, when it raised Rs 5,000 crore by selling the 10-year infrastructure bond at a 7.57% coupon. The issue was fully subscribed.

This comes as several banks are tapping the bond market to raise funds through infrastructure bonds to support their rapidly growing balance sheets.

Excluding today's bond issue, public sector banks and private sector banks have raised Rs 38,811 crore through infrastructure bonds so far in the current financial year, against Rs 30,895 crore raised in the first half of fiscal 2024, according to data by Informist.

In an exclusive interview with NDTV Profit last week, Reserve Bank of India Governor Shaktikanta Das said that it is positive to see banks raising funds through infrastructure bonds.

Banks and financial institutions raise money through infrastructure bonds to finance long-term infrastructure projects. These bonds have a minimum maturity of seven years and are eligible for some regulatory exemptions, such as the mandatory requirements of the statutory liquidity ratio and the cash reserve ratio. Affordable housing loans can also be used to finance infrastructure bonds.