SBI raises ₹10,000 crore through 15-year infrastructure bonds at coupon rate of 7.54%
1 min read 31 Jul 2023, 09:07 PM ISTSBI said that the proceeds will be directed towards bolstering long-term resources for funding critical infrastructure projects and supporting the affordable housing segment
PremiumIndia's largest lender State Bank of India (SBI) announced on Monday that it raised ₹10,000 crore after issuing 15-year infrastructure bonds at the coupon rate of 7.54%. The bank said that the proceeds will be directed towards bolstering long-term resources for funding critical infrastructure projects and supporting the affordable housing segment.
SBI said that the bank attracted bids of Rs. 21,698 crores, a staggering 4.34 times the base issue size, indicating robust demand for these financial instruments. The bank further informed that the investors range from various sectors including provident funds, pension funds, insurance companies, mutual funds, corporates, etc.
The bank offered bonds at an interest rate slightly better than the interest rate given by standard government bonds. SBI said that the bonds will be issued at a spread of 13 basis points (bps) over the standard government bond rates. SBI maintains an excellent credit rating of AAA with a stable outlook, as evaluated by domestic credit rating agencies, the bank said.
The high credit rating indicates that the bank is considered very reliable and has a low risk of default on these instruments.
Encouragement for other banks
SBI said that the issuance of Long Term Bonds despite the hardening of yields will help the bank in lending long-term to infrastructure. It may also help in developing a long-term bond curve and push other banks to issue longer-term bonds.
Earlier, on 19th January 2023, SBI had raised another set of infrastructure bonds worth Rs. 9,718 crores at a spread of 17 bps over the standard government bond rates.
The primary purpose of infrastructure bonds is to raise long-term capital to finance large-scale infrastructure projects that require substantial investment. By investing in infrastructure bonds, individuals and institutional investors contribute to the development of critical infrastructure, which benefits the overall economy. It has a fixed coupon rate, which is the interest rate paid to bondholders on a regular basis, usually annually or semi-annually.
