Bank of India and Punjab National Bank Plan Infrastructure Bond Sales Following Strong Demand for Bank of Baroda Issue

Indian State-Run Lenders Tap Market for Infrastructure Bonds

Bank of India and Punjab National Bank are set to issue infrastructure bonds before the end of the financial year, following robust demand for a recent 100 billion rupee bond issue by Bank of Baroda. According to sources, Bank of India plans to raise up to 100 billion rupees ($1.09 billion), while PNB will consider a 20-50 billion rupee issue.

The strong demand for Bank of Baroda's seven-year infra bonds, which were priced at a 7.10% coupon, has set a benchmark for future issuances. 60-70% of the bond was absorbed by a large state-run provident fund, indicating elevated investor interest. This has led to expectations of a similar response to future issuances, with Bank of India and PNB anticipating strong demand for their bonds.

Infrastructure bonds are used by banks to finance long-term development projects, with three Indian lenders raising an aggregate 250 billion rupees through these bonds so far this financial year. This is lower than the 892 billion rupees raised in the previous fiscal year, highlighting a lack of sufficient supply of such notes. As a result, bankers predict that demand for infrastructure bonds will remain strong in the coming weeks, driven by investors seeking to meet their exposure requirements.

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