State Bank of India (SBI) is looking to raise more than R10,000 crore through domestic infrastructure bonds in FY17, senior bankers told FE, adding that the proposal was in the preliminary stages and that the bank is yet to approach the board for the approval.
According to a banker, the bank is comfortable with pricing for the bonds at a rate that is lower than 7.75%. “Despite legacy of bad loans in the sector, we see opportunities in the infrastructure space with sectors like roads showing a good amount of pick-up,” he said. The government’s 10-year bond yield is currently at 6.87%.
In 2014, the RBI had allowed banks to issue long-term bonds with a minimum maturity of seven years to raise resources for lending to long-term projects in infrastructure. While the central bank had not put a ceiling on the quantum of such bonds, the regulatory incentives will be restricted to those that are used to finance long-term projects. “Our eligibility is around R30,000 crore under the guidelines,” the banker said.
These bonds are exempted from computation of net demand and time liabilities and are not be subjected to CRR/SLR requirements. Eligible bonds also get exemption in computation of adjusted net bank credit for the purpose of priority sector lending. The RBI has also allowed banks to issue masala bonds and encourage overseas rupee bond market. However, SBI is not looking to issue the rupee denominated bonds immediately.
SBI may also raise $1 billion through India’s first sale of dollar additional tier 1 bonds since the implementation of Basel III rules. Moody’s on Wednesday assigned the ‘B1’ (hyb) rating on the issue. The securities are issued under MTN programme, via the Dubai International Financial Centre Branch.