• Source:PTI
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State Bank of India (SBI), India's largest public sector lender, on Wednesday raised Rs 10,000 crore through its fifth infrastructure bond issue. SBI raised the funds at a coupon rate of 7.36 percent. The issue attracted an overwhelming response from investors with bids of over Rs 19,884 crore and was subscribed nearly four times against the initial issue size of Rs 5,000 crore, the RBI said in a regulatory filing.

The bank said the total number of offers received was 143, indicating broader participation with heterogeneity of offers. She added that the investors were through savings funds, pension funds, insurance companies, mutual funds, companies, and others.

The public sector lender added that the bond proceeds will be used to enhance long-term resources to finance the infrastructure and affordable housing sectors.

"Based on the response, the bank has decided to accept Rs 10,000 crore at a coupon rate of 7.36 percent payable annually. This represents a spread of 21 bps over the corresponding FBIL G-Sec par curve," it said.

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With the current issue, the total outstanding long-term bonds issued by the bank stands at Rs 49,718 crore. This issue is also very important as the bank has successfully raised long-term bonds in a row. This issuance will help develop the long-term bond curve and encourage other banks to issue bonds with a longer duration, SBI Chairman Dinesh Khara said.

What are bonds?

A bond is a fixed-income investment instrument in which an investor loans money to an entity (typically a government or corporation) for a specified period at a predetermined interest rate. The entity then pays the investor interest at regular intervals, as well as the original amount of the loan at maturity.

Bonds are used by corporations, municipalities, states, and sovereign governments to finance projects and operations. Bondholders are the lenders or creditors of the issuer.

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