State-run Bank of Baroda will likely offer tier-2 bonds worth ₹3,500 crore for 15 years, while private lender Axis Bank is looking at raising ₹3,000 crore through tier-1 bonds.
This comes immediately after the country’s largest bank, State Bank of India, raised ₹10,000 crore of infrastructure bonds at 7.23% for 15 years.
“The exact coupon rate and tenure are yet to be finalised, but some investors were called by officials of these respective banks to find out the levels,” said a market source on the condition of anonymity.
The money raised by banks in the form of tier-1 and tier-2 capital will help them improve their capital adequacy ratio. As of September 2024, the capital adequacy ratio for Axis Bank was 16.61%, while for Bank of Baroda, it was 16.26%.
Bank of Baroda and Axis Bank did not respond to emails seeking comment on Wednesday, a bank holiday in Mumbai due to assembly elections in Maharashtra.Banks had to offer higher deposit rates to attract savers and sell bonds to raise funds for the past couple of years as credit grew faster than deposits. The gap started to narrow over the past couple of months and, in the fortnight ended October 18, deposit growth edged above credit expansion after 30 months.Deposits in banks grew 11.74% year-on-year to ₹218.07 lakh crore in the two weeks, while credit growth came in at 11.52% at ₹172.38 lakh crore, latest Reserve Bank data showed.
Banks’ bond borrowings are expected to reach ₹1.2 lakh crore-₹1.3 lakh crore in this financial year amid tight liquidity conditions, according to a September report by rating firm ICRA. Public sector banks are likely to account for 82% to 85% of bank bond issuances, it said, with infrastructure bonds expected to account for more than two-thirds of the total share.