Borrowing rates for perpetual bonds have seen a fall of at least 33 bps since December.
Punjab National Bank on Wednesday raised Rs 1,500 crore through additional tier-I bonds or perpetual bonds at a coupon rate of 9.15%.
This is 33 bps lower than the coupon rate of 9.48%, at which Bank of Baroda had recently raised funds through perpetual bonds.
Perpetual bonds do not have a fixed maturity date.
Earlier in August, Bank of India had issued the same category of bonds at a coupon rate of 11%. Bond arrangers say with the fall in the number of those banks seeking to raise perpetual bonds compared with December, borrowing rates have come down significantly with investors now having fewer options.
“One of the reasons for the reduction in rate is the fewer number of perpetual bond issuances compared with December when all banks were in line to raise money through the same category of bonds,” said Ashish Jalan, assistant vice-president, fixed income at SPA Securities.
“Going forward, the spreads for perpetual bonds are expected to come down considering expectations of further interest rate cuts in 2015,” said Arvind Konar, head of fixed income at Almondz Global Securities.