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PSU banks lining up to raise capital through bonds
Several PSU banks are foraying to raise funds through bonds route amid continued competition in deposits segment. SBI is seeking to raise ₹ 5000-10000 crore through issuance of tier II bonds while Bank of Baroda is planning to issue infrastructure bonds worth ₹5000 crore. Canara Bank is also likely to raise ₹4000 crore (including green shoe option of ₹2000 crore) through issuance of AT1 bonds.
Given heightened competition in liabilities, funding through issuance of bonds will aid banks to meet incremental credit demand along with benefit of improved capital adequacy and/or exemption to keep reserves (SLR and CRR). In addition, relatively stable deposit franchise along with lower CD ratio is seen to provide cushion to the balance between growth and margin (profitability).
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