State Bank Of India To Raise Up To Rs 10,000 Cr Via Additional Tier-1 Bonds

The State Bank of India (SBI) is planning to raise Rs 10,000 crore of funds through the issuance of additional tier-1 (AT-1) bonds this week, three merchant bankers were quoted as saying by Reuters.

India’s largest lender is looking to raise capital through bonds amid strong credit growth with a base size of Rs 3,000 crore and a green shoe option of Rs 7,000 crore, the sources further added.

Furthermore, the bidding of the bond is likely to take place on July 13 between 10:30 am to 11:30 am. The rate of interest to be paid to the investors would likely be around 8%.

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As SBI is termed as the largest lender of India, its coupon rates for AT-1 bonds are generally the lowest among all lenders.It also has a call option at the end of 10 years and is rated AA+ by Crisil and ICRA.

The lender also said that it is looking to raise up to Rs 50,000 crore this financial year by issuing debt instruments, in an exchange filing in June.

The latest Reserve Bank of India (RBI) data revealed that the bank’s credit growth was 15.4% year-on-year (YoY), while its deposit growth rate was 12.1%, as of June 16. As per reports, the wide gap between credit and deposit growth has exerted pressure on banks to mobilise funds.

The bank had earlier issued its AT-1 bonds in the debt capital market with a coupon rate of 8.25% in March. Since then, yields on government bonds have fallen sharply as the RBI unexpectedly paused rate hikes at its April review. Since April 6, yield on the 10-year benchmark government bond has fallen close to 20 basis points.