Public sector banks have reported a strong credit growth, driven by higher demand for loans, and a reduction in Non-Performing Assets, which indicate defaults. SBI being the leading state-owned lender in the country, also posted a credit growth of almost 20 per cent, and is taking measures to sustain this surge. The top PSB is now considering a Rs 10,000 crore fundraiser, through sale of infrastructure bonds, in the current financial year.
Filling up coffers to provide more credit
The bond sale will be discussed further when the bank’s central board’s executive committee will meet on Tuesday, November 29. The funds will support SBI’s aim to achieve a credit growth of 14 to 16 per cent in FY23, by bringing in more deposits. Last month, it was also reported that the deposits in Indian banks are half of the borrowing, even if loans surged two-fold.
What are infrastructure bonds?
The infrastructure bonds which SBI may sell, are debt instruments which are released by government firms or private developers, to raise loans for building roads, ports or similar projects. Interest is paid on bonds at regular intervals, and the principal amount is paid back after the bond has matured on a predetermined date. Buying these bonds can also bring tax saving benefits for investors, worth almost Rs 20,000 crore.
Keeping a check on bad loans
With NPAs at 0.8 per cent, SBI is also aiming to keep bad loans in control, to buckle them below 1 per cent for coming quarters as well. The funds will ensure a cashflow that will allow SBI to cater to a higher demand for loans. A greenshoe option for Rs 5000 crore will also be included in the bond sale, which is a provision that allows a firm to issue more instruments than initially planned.
In FY22, 10 per cent of all loans provided by the SBI were for the infrastructure sector, and the lender has plans to step up financing for roads, ports and power generation projects.
