“They (Axis Bank ) are likely to upload the details on the electronic platform tomorrow (Thursday) for an AT-1 issue with a base size of Rs 1,000 crore and a greenshoe option of Rs 2,000 crore,” a source said. The bonds are likely to have a call option of 10 years.
Based on the demand for the debt sale, the coupon rate – or the rate of interest paid out to investors – could be in the range of 8.30-8.35%, another source said.
In early September, Axis Bank had raised Rs 3,925 crore through the sale of 10-year infrastructure bonds, raising long-term capital through the debt sale.
The private sector lender had raised the funds at a coupon rate of 7.45%, debt capital market executives had said. The bond issuance had a base size of Rs 2,000 crore and a greenshoe option of Rs 2,000 crore.
AT-1 bonds are perpetual bonds, which have certain equity-like characteristics and features which permit banks to absorb losses in cases of severe financial stress. Given the higher risk perception associated with these bonds, banks typically pay a higher rate of interest to raise funds through these instruments than other debt securities.Over the past couple of years, the banking system has witnessed a higher pace of incremental loan growth than deposit growth, compelling lenders to resort to bond sales and issuances of certificates of deposit to meet the credit demand.According to figures provided by Prime Database, banks have issued bonds worth Rs 76,936 crore from April 1 to September 25.
As on September 6, bank credit growth was at 14.7% year-on-year, while deposit growth was at 11.6% over the same period, latest Reserve Bank of India data showed.