SBI Raises Rs 7,500 Crore Via Tier-II Bond Issue at 7.42%

The State Bank of India raised Rs 7,500 crore through the issue of Tier-II bonds maturing in 15 years at a 7.42% coupon, the lender said in a media statement on Wednesday.

The coupon rate was largely in line with the market's expectations of around 7.35-7.40%.

Last week, NDTV Profit exclusively reported that the state-owned bank will tap the bond market with a Tier II bond issue this week.

The 15-year bond issue carries a call option after 10 years from the date of allotment. The state-owned bank received 70 bids worth Rs 8,895 crore at a coupon range of 7.25–7.50%, according to a bid book accessed by NDTV Profit.

The bank saw strong demand for its Tier II bond issue from pension funds, provident funds, mutual funds and other banks, it said in a statement. The bonds were rated 'AAA' by ICRA and India Ratings & Research.

Tier-II bonds are a part of a bank's borrowing mix with less risk than Tier-I bonds in the event of a default. Tier-II bonds are considered subordinated debt because they do not have the first claim on assets in the event of bank liquidation.

The last time SBI raised funds through a Tier II bond issue was in late 2023, when it mopped up Rs 10,000 crore through a 15-year bond at a coupon of 7.81%.

So far this fiscal, SBI has raised Rs 20,000 crore through two tranches of infrastructure bonds.

At the Global Fintech Fest, SBI Managing Director Ashwini Kumar Tewari told NDTV Profit that banks are issuing infrastructure bonds to meet their liabilities, and that it is helping the bank with deposit growth.