Rating agency Crisil today said it has given an ‘AA+’ (stable) rating to Andhra Bank’s Rs 1,000-crore long-term infrastructure bond, making it the first rated issuance after revised Reserve Bank of India (RBI) guidelines.
It has also reaffirmed its ratings on the bank’s tier I perpetual bonds and upper tier-II bonds at ‘AA/stable’.
Earlier this month, the RBI had revised regulations on long-term bonds, with a minimum maturity of seven years, for financing infrastructure projects and affordable housing, issued by banks.
The RBI also granted exemptions from mandatory cash reserves ratio (CRR), statutory reserves ratio (SLR) and priority sector lending (PSL) for such bonds.
“Given the exemption from statutory reserve requirements and priority sector obligations, these bonds will be cost effective for the issuing bank. The benefit would be around 75 bps compared with longer-maturity deposits,” Crisil Senior Director Pawan Agarwal said.
These bonds would also help banks improve their asset-liability profile.
Around a fifth of outstanding banking sector credit as on March 2014 end was for infrastructure and affordable housing segments.
According to Crisil’s estimates, at least Rs 3 trillion worth of loans to these sectors, both current and prospective, would qualify for funding through infrastructure bonds during the current fiscal.
“Given the magnitude of eligible loans for funding, issuances of these bonds will pick up over time,” Agarwal said.