Union Bank of India is looking to raise Rs 10,000 crore, while State Bank of India may issue around Rs 7,500 crore, three people familiar with the matter told ET.
Other public sector lenders, including Punjab National Bank and Indian Bank, are also expected to enter the market, though details like size and tenure are yet to be finalized, the people said.
India’s state-owned banks are planning to issue a new green bond after Bank of Baroda’s successful ₹10,000 crore seven-year bond at a 7.10% coupon. Union Bank of India and State Bank of India are expected to raise significant amounts, with other public sector lenders also eyeing the market.
The pipeline comes as investors show limited appetite for long-dated bonds as India nears the end of its rate-cutting cycle.
Many borrowers have pulled back planned sales due to a rise in yields driven by global volatility. On Bank of Baroda’s issuance day, state-run Sedbi lost its planned Rs 8,000-crore, three-year bond after bids came in at higher-than-expected yields.
InstitutionsUnion Bank, SBI and others will signal again after Bank of Baroda raises Rs 10,000 crore at 7.10%
The 7.10% yield for Bank of Baroda paper was significant as the 10-year government bond was trading at around 6.72% at that time. This means Bank of Baroda has raised funds at a spread of nearly 40 basis points over the benchmark government security yield. Typically, such bonds are priced at a spread of 70-100 basis points above the benchmark paper.
Life Insurance Corporation (LIC) and Employees’ Provident Fund Organization (EPFO) have fully participated in the Bank of Baroda issue and are likely to participate in the planned Union Bank and SBI bonds as well, the people said. “March is usually the time when LIC and EPFO push to meet their corporate bond placement targets, but supply has been reduced this year as corporates find bank loans more attractive. Still, it is unusual for them to invest at 7.10% for seven years when the same yield is available for three-year bonds,” said a primary corporate bond trader.
Recent deals include Nabard mobilizing ₹5,055 crore for three years at 7.10%, while Canara Bank mobilized ₹5,000 crore for 10 years at 7.24%.
India currently has no regulatory obligation for any agency to allocate funds exclusively to green exports.
“It is possible that the Center will encourage public sector entities to support PSU bank bonds. But retail buyers are investing in LIC for strong returns and buying green bonds at low rates could affect the final yield of these institutions,” said a bank analyst at a brokerage.
