Punjab National Bank to raise Rs 12,000 cr via bonds

Indian state-run lender Punjab National Bank said on Wednesday it would raise up to Rs 12,000 crore ($1.46 billion) in one or two tranches, through the issue of bonds.

The lender said it would raise up to Rs 7,000 crore from the issue of Additional Tier 1 (AT1) bonds and the remaining Rs 5,000 crore from Tier II bonds.

AT1 bonds act as shock absorbers if a bank's capital levels fall below a certain threshold and can be converted into equity or written off.

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On March 24, Punjab National Bank raised Rs 974 crore ($118.3 million) at 8.75 per cent, 35 basis points higher than its previous bond sale in December.

It did not raise the full amount it could have, of up to Rs 2,000 crore.

While Indian banks do not have large dependence on AT-1 bonds, state-owned banks have a higher reliance on these securities, analysts said after Credit Suisse wrote down these bonds as part of its merger with UBS.

This, analysts said, could impact the pricing of these securities marginally in the Indian market.

($1 = 82.2800 Indian rupees)