Bank of India plans to lift Rs 5,000 crore through infrastructure bond issue

Public sector lender Bank of India (BoI) is looking to raise an additional Rs 5,000 crore through infrastructure bonds, against the backdrop of soft interest rate trends. In the last week of November, BOI raised Rs 5,000 crore through a 10-year infrastructure bond issuance at a coupon rate of 7.41 percent. These bonds are particularly advantageous for banks as they are exempt from regulatory reserve requirements such as the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).

In July, BOI had raised Rs 5,000 crore through a similar 10-year infrastructure bond offering at a slightly higher coupon rate of 7.54 percent. In total, the Mumbai-based lender has raised Rs 10,000 crore in two tranches. A BOI official said the appetite for infrastructure bonds is good.

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The plan to raise an additional approximately Rs 5,000 crore is currently under discussion. The bank may seek board approval to raise these funds through infrastructure bonds, depending on the liquidity conditions and pricing trends in the market.

Despite tight liquidity in the banking system, there has been strong investment demand from institutional investors for long-term bonds issued by government-owned banks. Bond dealers project that commercial banks' infrastructure bond issuances for the financial year 2025 (FY25) will exceed Rs one trillion, nearly double the amount raised in FY24.

Many other PSBs, State Bank of India, Bank of Baroda, Canara Bank, Bank of Maharashtra and Indian Bank have also raised sizable amounts through infra bonds in the current financial year.

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