Bank of India is likely to carry out its infrastructure bond sale around the third week of July, with the state-owned lender likely to opt for securities maturing in 10 years, people aware of the matter said.
Emails sent to SBI and Bank of India seeking comment did not receive responses by the time of publication. With bank credit growth persistently outstripping deposit growth over the past couple of years, Indian lenders have been compelled to aggressively push for mobilisation of 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.
For SBI, next week’s likely bond sale would close the lender’s plans for long-term bond issuances for the current financial year. On June 19, the bank had informed exchanges that it had received board approval for the sale of long-term bonds worth up to Rs 20,000 crore in 2024-25 (April-March).
BENCHMARK YIELD
With government bond yields softening over the past few weeks — in the run-up to the inclusion of Indian sovereign debt in a JP Morgan index — cost of borrowing in absolute terms for highly-rated corporate entities has reduced. Yield on the 10-year benchmark government bond
closed at 6.99% on Friday, much lower than 7.11% on the first working day of the current financial year.
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