ICICI Bank to raise Rs 10,000 cr via infra bonds in one or more tranches

Proceeds to be used for project financing, affordable housing

ICICI Bank is likely to raise up to Rs 10,000 crore through infrastructure bonds for project financing and affordable housing.

These long-term bonds carry the benefit of exemption from maintaining cash reserve ratio (CRR) and statutory liquidity ratio (SLR).

This helps them to mitigate the asset-liability management (ALM) problems faced in extending project loans to infrastructure and core industry sectors. Bond market sources said these bonds could be issued in one or more tranches based on requirements and market conditions.

Rating agency ICRA has assigned “AAA” rating to the proposed infrastructure bond offering by ICICI Bank.  

ICICI Bank’s borrowing through long-term infrastructure bonds stood at Rs 38,809 crore at the end of June 2022. It is up from Rs 22,139 crore a year ago, according to the bank’s investor presentation for Q1 of FY23.

In August 2022, Bank of Baroda had raised Rs 1,000 crore through these bonds at a coupon of 7.39 per cent. It has approval to raise up to Rs 5,000 crore through these bonds.

The maturity period of the long-term infra bonds should be at least seven years. Banks are required to first provide assistance to such infrastructure projects before raising resources through bonds.

The Reserve Bank of India (RBI) also allows exclusion from adjusted net bank credit for funds raised through long-term bonds for financing infrastructure and low-cost housing, subject to certain limits. With thrust in capital expenditure for supporting economic growth, investment and credit to infrastructure sector, including roads, ports and power has also seen a rise.

Banking sector loans for the infrastructure sector rose by 11.1 per cent year-on-year to Rs 12.14 trillion in July 2022.

However, last year bank lending to the infrastructure sector was flat with just 0.3 per cent growth in July 2021, according to RBI data.

About half of the loans of the infrastructure sector are to the power sector (Rs 6.27 trillion) followed by the roads sector (Rs 2.79 trillion).

The high incidence of stressed assets in the infrastructure sector had made banks, especially private lenders, wary of giving fresh loans to projects.