Private-sector lender Kotak Mahindra Bank has raised Rs 1,895 crore through seven-year infrastructure bonds for lending in sectors like power and roads as well as housing.
The coupon for bonds was fixed at 7.55 per cent. The issue had two components — a base size amounting to Rs 1,250 crore and a greenshoe option to retain another Rs 1,250 crore. While the issue received bids worth Rs 3,605 crore, the bank accepted Rs 1,895 crore at 7.55 per cent, the bank said in a statement.
These bonds carry “AAA/Stable” ratings from CRISIL. The board of directors has given the nod to raise an amount not exceeding Rs 7,000 crore through bonds. Infrastructure bonds are long-term instruments with at least a seven-year maturity.
Bond market dealers said the bank got a better price for its bond because the yield hardened by 7-8 basis points on government bonds in the past seven days. Investors were largely insurance companies and other institutions.
The amount of funds raised by banks through infrastructure bonds declined to Rs 19,900 crore in FY23 from about Rs 27,200 crore in FY22. Banks that were prominent in using infrastructure bonds were SBI (Rs 10,000 crore) and ICICI Bank (Rs 7,100 crore), according to the data from JM Financial Services.
Sujata Guhathakurta, president (debt capital market and infrastructure financing), Kotak Mahindra Bank, said “the infra bonds are a good avenue for liability raise as they do not attract any reserves requirement for banks”.
The cash reserve ratio (CRR) and statutory liquidity ratio (SLR) do not apply to infrastructure bonds, and that leaves more money in the hands of banks for lending.
At present, banks have to maintain 4.5 per cent of net liabilities as CRR with the Reserve Bank of India (RBI) and park 18 per cent of net liabilities in bonds and financial instruments as SLR. According to RBI norms, besides infrastructure projects like power, roads, and ports, the money raised through these bonds can be used for giving housing loans that are eligible for priority sector lending. This covers home loans to individuals for acquiring dwelling units within the prescribed threshold under the affordable housing category.
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