State Bank of India is set to kick off domestic bond issuances for 2024 with the sale of an additional tier-1 (AT-1) bond worth up to ₹5,000 crore. Bidding for the issue would happen on Thursday, people aware of the development said.
SBI’s AT-1 bond could be priced at around 8.25%, with long-term investors likely to show strong demand, the people said.
Meanwhile, Bank of Baroda (BoB) is likely to raise up to ₹5,000 crore soon by issuing 10-year infrastructure bonds, said the people cited above.
Canara Bank could also raise up to ₹3,000 crore through the issuance of AT-1 bonds later this month, while Bank of Maharashtra and Central Bank of India are considering the option of raising funds through infrastructure bonds.
Agencies“We have seen a correction in bond yields which happened since December. There would be an understanding between issuers and investors that the current levels are good levels because yields have cooled down substantially at a global level as well. So, the issuances will definitely improve in Q4,” said Anil Gupta, senior vice president at credit rating agency ICRA.
On the funding side, metrics such as banks’ credit-deposit ratios, the borrowing through the Reserve Bank of India’s Marginal Standing Facility window as well as huge subscription in the central bank’s variable rate repo auctions indicate scarcity of liquidity in the system.Meanwhile, expansion in bank credit continues to surpass deposit growth, exerting pressure on lenders to shore up capital. Excluding the impact of the merger of HDFC Bank with HDFC, bank credit growth was at 15.6% year-on-year as of December 29, while deposit growth was at 12.6%, latest RBI data showed.
“Credit deposit ratio for the system was at 77.1% on the basis of stock of deposits and credit. But at the flow level, there was moderation from 115.5% to 93.56% in 2023. This ratio is also high and has been funded primarily by own capital as well as borrowings,” wrote Madan Sabnavis, chief economist, Bank of Baroda.
