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IDBI Bank – First commercial bank to raise $350 mn via green bonds

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Mumbai headquartered IDBI Bank has become the first commercial state-owned bank to raise $350 million via selling green bonds, where proceeds are used for clean energy projects.

  • Bonds were priced at 4.26% (fixed rate) after adding a mark-up or spread of 255 basis points on five-year US Treasury now at 71%. But, the bank has converted those securities into floating rate, and they are offering 3.22%
  • Bond will be of five-year maturity. This is a part of the bank’s medium-term-note programme, set at $5 billion over next few years.

IDBI Bank - First commercial bank to raise $350 mn via green bondsFitch Ratings to IDBI Bank’s bond: BBB-/Stable

The bank has already lent $300 million to such projects and is in talks with several others to lend $2 billion over the next 12-15 months. The bank has appointed about five arrangers to market the bonds. The bonds enjoy the country’s sovereign rating of BBB-, the lowest in investment grade.

What are Green Bonds?
A green bond is like a normal bond with which an entity raises money from investors. The bond issuer gets capital while the investors receive fixed income in the form of interest. When the bond matures, the money is repaid.

  • The only difference is that the issuer of a green bond publicly states that capital is being raised to fund green projects which typically include those relating to renewable energy, emission reductions.

Keys
IDBI CEO – Kishor Kharat
IDBI Tagline – Banking For All: “Aao Sochein Bada”