This placement is likely to set off a trend among banks which are looking for avenues to deploy the proceeds of Resurgent India Bonds (RIBs).

Sources said that with credit showing no signs of taking off, banks that have raised money through the RIBs are increasingly resorting to "one-to-one" private placement of debt with corporates.

Citibank and Stanchart are likely to follow suit, industry sources said. Both these banks top the chart in mopping up the RIB money from non-resident Indians across the globe. "A few blue-chip corporates are negotiating with both these banks for placement of five-year papers at around 13 per cent," a source said. Private banks are also likely to follow suit.

"It makes sense to go forthis kind of investment. While we have to pay 9.50 per cent for the RIBs, by striking such placement deals, we can park the RIB at least at 13-13.5 per cent for a five-year tenure," a head of credit in a major public sector bank said.

BoB, through the placement of the tax-free bonds at 10.75 per cent, stands to earn a coupon of 16.50 per cent post tax -- about 300 basis points higher than the banks' prime lending rate. "This is definitely a very good deal for BoB as government security of a similar maturity carries an yield of 12.25 per cent," an investment banker said.

At present, placing an amount with the government securities for a five-year period will ensure the bank a return of 11.90 per cent while for triple-A rated corporates, the return is a good 150 basis points higher.

Sources said that a number of banks which have collected money through the RIBs are negotiating with the Infrastructure Development Finance Company (IDFC) for takeout financing. This will ensure that there is a guarantee afterthe fifth year, sources said.

At present, blue-chip corporates like Telco, Larsen & Toubro, Mahindra and Mahindra, Gujarat Ambuja and India Cements are in the private placement market to raise debt. The benchmark rate for a five-year bonds from an AAA rated company is 13.50 per cent. Recently, the State Bank of India placed Rs 1,000 crore with the Industrial Development Bank of India for a five-year tenure at 12.75 per cent.