"Even if we undercut our competitors by 300-400 basis points, we will still have a comfortable spread as the cost of RIB money is about 8.5 per cent," SBI chairman MS Verma said.

Infrastructure financing is set to get a big boost with the resounding success of the Resurgent India Bond which closed on August 24 after mopping up $4.16 billion.

Verma attributed the success of the five-year triple-currency issue to the specification of the end-use of the bond proceeds. "We had spelt out to the investors that the money will be used in infrastructure financing. The NRIs believe that infrastructure is the key to India's development and hence the overwhelming response to the issue," Verma said.

The SBI chairman is confident of disbursing about Rs 4,000 crore from the RIB corpus towards infrastructure projects in 1998-99. "There are enough projects in the pipeline. I am sure we will be able to disburse about Rs 4,000 crore in India and abroad this fiscal for infrastructure financing," Verma said.

There are about 50 large projects which are ready to get into the construction phase towards which banks and financial institutions have sanctioned about Rs 30,000 crore. The demand from infrastructure projects in the next two years alone is expected to be in the region of Rs 60,000 crore.

Asked whether he expected any credit demand from the core sector given the current state of the economy, Verma said that infrastructure projects which are currently borrowing at rates ranging from 15-16 per cent will be at an advantage if they borrow from the State Bank given its low cost of funds.

The SBI chairman also hinted that the bank will deploy the funds any which way it wants to make the maximum profit till the demand for infrastructure financing picks up. "We will deploy money in call markets, buy government securities....We will make most of the situation. We will not lock the RIB funds for five years. We will continuously reshuffle the assets to make the maximum profit," Verma said.

INSIGHT

To score in term lending

The State Bank of India's access to relatively low cost long-term funding through the Resurgent India Bonds will enable it to undercut other banks as also financial institutions in term lending. There have been few signs of any pick-up in credit so far, and much of the increase in disbursements is on account of substitution of ECBs. However, if the projects for which the Rs 30,000 crore have been sanctioned take off, the RIB money can be easily deployed in infrastructure.