State Bank of India plans to test the waters with a 10-year retail bond issue in the next financial year. To begin with, the bank will mop up between Rs 50 crore and Rs 100 crore through the bond issue, which will carry a market-related interest rate, said the SBI Chairman, Mr O. P. Bhatt.
Market watchers say that if the bank offers an attractive coupon rate, then the long-term (infrastructure) bonds could get a good response from retail investors. The Budget 2010-11 had proposed an additional deduction of Rs 20,000 on long-term infrastructure bonds for income-tax payers over and above Rs 1 lakh deduction allowed on saving instruments.
Resources raised via long-term retail bonds can, to an extent, help banks correct asset-liability mismatches arising from short-term liabilities financing long-term assets.
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