Exclusive: SBI Plans To Raise Up To Rs 7,500 crore Via Tier-II Bonds By August-End

State Bank of India plans to raise up to Rs 7,500 crore by issuing Tier-II bonds by the end of this month, people in the know told NDTV Profit, as India's largest lender looks to shore up capital.

"Yes, they are planning to come with a Tier-II bond by August-end. The amount will get confirmed on Monday in a meeting, but most likely it will be Rs 7,500 crore. It could also be Rs 5,000 crore," one of the people cited above, who is involved in the transaction, said.

The base size of the issue is Rs 2,500 crore but the greenshoe option may be Rs 2,500 crore or Rs 5,000 crore, depending on the final amount that the bank decides, this person said. The maturity of this bond issue is likely to be 10 years. Market participants are expecting SBI to issue these 10-year Tier-II bonds at a coupon of 7.35-7.40%.

To be sure, SBI was said to have been in talks to raise funds through a Tier-I bond issue but is likely to the hit the bond market with a Tier-II bond first. Earlier this week, India Ratings and Research assigned a AAA rating to SBI's Tier-II bonds worth Rs 7,500 crore.

SBI is likely to upload this bond issue on the electronic bidding platform on Monday after it finalizes the details, the people said.

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

So far this fiscal, Bank of Maharashtra is the only lender to have tapped the debt market with a Tier-II bond issue. In July, it raised Rs 1,000 crore via 10-year Tier-II bonds at a coupon of 7.89%. It was fully subscribed.

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.