Illustration: Ajay Mohanty2 min read Last Updated : Jul 18 2024 | 6:09 PM IST State-owned lender Bank of India (BoI) on Thursday raised Rs 5,000 crore at a coupon rate of 7.54 per cent through 10-year infrastructure bonds. The issue had a base size of Rs 2,000 crore and a green shoe option of Rs 3,000 crore.

The proceeds of the issue will be utilised by the bank towards infrastructure lending. BoI’s fund raise follows the fund raise by Canara Bank earlier this week, wherein it raised Rs 10,000 crore at a coupon rate of 7.40 per cent through 10-year infrastructure bonds. Previously, State Bank of India (SBI) raised Rs 20,000 crore in two tranches at a coupon rate of 7.36 per cent.

SBI raised Rs 10,000 crore on June 26 and an additional Rs 10,000 crore on July 10 from the debt market. With long-term rates easing, banks are increasingly turning to infrastructure bonds to raise funds, particularly as the pace of deposit mobilisation has slowed down. Another public sector lender, Bank of Maharashtra, has said it is looking to raise Rs 10,000 crore through infrastructure bonds, with the first tranche of Rs 2,000-2,500 crore expected this year. Infrastructure bonds have a tenor of at least seven years, and the proceeds are utilised by banks to fund long-term infrastructure projects.

Banks benefit from infrastructure bonds because they do not incur regulatory reserve requirements such as the statutory liquidity ratio (SLR) and cash reserve ratio (CRR), allowing them to optimise their liquidity management strategies effectively.First Published: Jul 18 2024 | 6:00 PMIST