SBI Raises Rs 5,000 Crore Via AT1 Bonds At 7.98%

State Bank of India has raised Rs 5,000 crore through the issuance of Additional Tier-I bonds at a coupon of 7.98%, two merchant bankers told NDTV Profit.

This is the state-owned bank's first issuance of Additional Tier-I bonds in the current financial year and its coupon is said to have been in line with market's expectations of 7.90-8.00%.

The issue, which had a base size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore, was fully subscribed.

The bonds, rated 'AA+' by Crisil Ratings, carry a call option after 10 years, the above-mentioned people said. The allotment date of this bond issue is Thursday. SBI Capital Markets Ltd. is the arranger for this bond issue.

Market participants have been keenly watching out for SBI's Tier-I bond issue as it will set precedence for other banks in the market, especially after the Securities Exchange Board of India earlier this year eased the valuation norms on such papers.

Basel-III compliant Tier-I bonds are essentially perpetual bonds that have trigger points linked to a bank’s capital and earnings. If these triggers are breached, it can lead to interest payments being stopped. This situation could even lead to the conversion of the bond into equity.