Axis Bank and Indian Bank are likely to raise funds worth up to Rs 9,000 crore through the sale of infrastructure bonds next month, as lenders continue to rely on debt issuances to mobilise funds amid a slower pace of deposit growth than credit growth.
Private sector lender Axis Bank’s infrastructure bond sale is likely to have a base size of Rs 2,000 crore and a greenshoe option of Rs 2,000 crore, debt capital market executives said on condition of anonymity. The bonds are likely to have a maturity of 10 years.
Meanwhile, state-owned lender Indian Bank may tap the debt market in mid-September, the sources said.
“Axis Bank’s issuance could hit the market by next week while Indian Bank has taken a rating for Rs 5000 crore. Bond market conditions are favourable with sovereign bond yields anchored due to surplus liquidity and firm foreign flows. There is a lot of activity happening in the infrastructure sector and banks are opting for infra bonds to finance that,” a source said.
For banks, infrastructure bonds come with an advantage – funds raised through these securities are exempt from the regulatory requirement of maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
With bank credit growth persistently outstripping deposit growth over the past couple of years, lenders have been compelled to mobilise funds through higher deposit rates or issuances of debt instruments. In this scenario, infrastructure bonds help banks manage their interest rate margins more efficiently as the exemptions from reserve requirements for these instruments bring down cost of funds.
So far in the current financial year, banks have issued infrastructure bonds worth around Rs 43,500 crore, treasury executives said. The country’s largest lender State Bank of India has led the pack with total infrastructure bond issuances worth Rs 20,000 crore so far in FY25.
As on August 9, bank deposit growth was at 11.3% year-on-year while credit growth was at 15.0%, latest data released by the Reserve Bank of India showed.
