Post RBI infra bond breather, ICICI looks to raise Rs 1,000 crore at a rate of 9.15% semi-annually
MUMBAI: ICICI Bank is set to become the first bank to raise money through infrastructure bonds to fund affordable housing under a recently announced programme, as the nation's largest non-state lender readies an issue of as much as Rs 1,000 crore.
New Reserve Bank of India rules exempt banks from compulsory reserve requirement on the money raised by selling bonds with tenure of seven years and more to fund infrastructure and low-cost housing projects as the government aims to provide housing for all.
At present, banks set aside 4% of total deposits as cash reserve ratio with the RBI and earns no interest on it. Another 22.4% is invested in government securities with an about 8% return. If that fund is lent to large project, it would earn about 11% in the current market, giving a clear three percentage point advantage to lenders.
ICICI Bank plans to sell 10-year paper at a coupon of 9.15% to be paid semi-annually, said a banker with knowledge of the plan. The annual interest rate may come around 9.36%. It is planning to raise at least Rs 500 crore, with an option to keep another up to Rs 500 crore if demand exceeds the issue size, this person said. "The timing of the bond is not yet decided."
ICICI Bank didn't respond to an email seeking comment. Other private banks are also considering issuing such bonds, but ICICI Bank is probably in an advanced stage as the banker said it has already decided on the likely coupon rate.
Earlier this week, Yes Bank said its board has approved a plan to raise Rs 3,000 crore of long-term bonds to finance infrastructure and affordable housing. It intends to seek shareholder approval for the proposal, said Chief Financial Officer Rajat Monga.
Axis Bank MD and CEO Shikha Sharma said it was a good way to get stable funds and "so we are looking at it". But since such a plan needs shareholders' approval, it will not happen in a hurry, she said.
These bonds offer banks a new avenue for raising long-term funding to finance infrastructure and affordable housing projects, Ajay Marwaha, executive vice president and head of trading at HDFC Bank, had said earlier.
"Builders today get financed at very high interest rates so there will be demand for this alternate source of fund. Bank wisll tap any market where there is a spread," he had said.
"Investors who invest in REIT funds would invest in these bonds." Insurance funds and mutual funds too may invest, depending on clearances from their regulators, he had told ET.
- The Times of India on Mobile
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
You received this message because you are subscribed to the Google Groups "Product Updates for AMC" group.
To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.
New Reserve Bank of India rules exempt banks from compulsory reserve requirement on the money raised by selling bonds with tenure of seven years and more to fund infrastructure and low-cost housing projects as the government aims to provide housing for all.
At present, banks set aside 4% of total deposits as cash reserve ratio with the RBI and earns no interest on it. Another 22.4% is invested in government securities with an about 8% return. If that fund is lent to large project, it would earn about 11% in the current market, giving a clear three percentage point advantage to lenders.
ICICI Bank plans to sell 10-year paper at a coupon of 9.15% to be paid semi-annually, said a banker with knowledge of the plan. The annual interest rate may come around 9.36%. It is planning to raise at least Rs 500 crore, with an option to keep another up to Rs 500 crore if demand exceeds the issue size, this person said. "The timing of the bond is not yet decided."
ICICI Bank didn't respond to an email seeking comment. Other private banks are also considering issuing such bonds, but ICICI Bank is probably in an advanced stage as the banker said it has already decided on the likely coupon rate.
Earlier this week, Yes Bank said its board has approved a plan to raise Rs 3,000 crore of long-term bonds to finance infrastructure and affordable housing. It intends to seek shareholder approval for the proposal, said Chief Financial Officer Rajat Monga.
Axis Bank MD and CEO Shikha Sharma said it was a good way to get stable funds and "so we are looking at it". But since such a plan needs shareholders' approval, it will not happen in a hurry, she said.
These bonds offer banks a new avenue for raising long-term funding to finance infrastructure and affordable housing projects, Ajay Marwaha, executive vice president and head of trading at HDFC Bank, had said earlier.
"Builders today get financed at very high interest rates so there will be demand for this alternate source of fund. Bank wisll tap any market where there is a spread," he had said.
"Investors who invest in REIT funds would invest in these bonds." Insurance funds and mutual funds too may invest, depending on clearances from their regulators, he had told ET.
- The Times of India on Mobile
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
You received this message because you are subscribed to the Google Groups "Product Updates for AMC" group.
To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.
Comments
Post a Comment
You are requested to mentioned your full name with email id while commenting.