Mumbai: Andhra Bank will increase Rs 1,000 cr through long-term infrastructure bonds to fund projects with long gestation. Rating agency CRISIL has allocated its ‘AA+/stable’ rating to the Rs 1,000-cr long- term infrastructure bonds of the bank. It is the first issuance to be rated after the RBI improved rules on July 15, CRISIL said in a declaration.
The new rules are positive for banks, as they open up a much-needed, long-term funding avenue – that, too, with minimum regulatory pre-emption.
Pawan Agrawal, mature home, CRISIL Ratings, said: “Given the exception to this rule from statutory reserve requirements & priority-sector obligations, these bonds will be cost-effective for the issuing bank.”
The benefit would be around 75 basis points in compared to longer-maturity deposits. The bonds will also help banks improve their asset-liability profile.
RBI’s move to revise the rules on long-term bonds (with a minimum maturity of 7 years) for funding facilities infrastructure & for affordable housing – by scheduled commercial banks – followed a similar announcement in the Union Budget on July 10.
Apart from statutory liquidity ratio and cash reserve ratio exemptions, advances against these bonds are also exempt from priority-sector lending obligations.
Around a 5th of outstanding banking sector credit as on March 31, 2014, was to infrastructure & affordable housing segments. CRISIL estimates at least Rs 3, 00,000 cr of loans to these sectors – both current and prospective – would be eligible for a financing through infrastructure bonds in the current financial.
Agrawal said, “Given the magnitude of eligible loans for financing, the issuance of these bonds will pick up over time.”
These measures by RBI will also help in deepening & developing the Indian bond market, rating agency added.
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