Bank of Baroda raises Rs 5,000 crore via 10-year infra bonds at 7.3%

State-owned Bank of Baroda (BoB) has raised Rs 5,000 crore through 10-year infrastructure bonds at a coupon rate of 7.3 per cent, according to sources aware of the development.

The bond offering, rated AAA by CRISIL Ratings, had a base issue size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore and was fully subscribed.

The PSB-led issue observes strong demand, which is typical for such instruments as pension funds prefer to invest in long-term bonds, and the cut-off rates for future infrastructure bond issues were expected to be in the range of 7.3 percent to 7.35 percent for state-owned banks, and 7.35 percent to 7.4 percent for private banks.

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The Funds raised through infrastructure bonds are attractive from a bank’s point of view since they are exempt from regulatory reserve requirements such as the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).

Banks, especially state-owned banks, have raised funds through infrastructure bonds recently. SBI raised Rs 20,000 crore in two tranches through 15-year infrastructure bonds at 7.36 percent. The first tranche of Rs 10,000 crore was raised in June, with another tranche following in July.

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