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State Bank of India

The largest lender in the country, State Bank of India, might launch a rupee bond issue with additional Tier-1 bonds to mop up Rs 10,000 crore, The Economic Times has reported quoting sources. The timing of the issue could be between end of June or early July.

Additional Tier-1 bonds are unsecured bonds that do not bear a pre-determined maturity date. It constitutes a part of the core capital of the bank.

The development comes close to the heels of the SBI board clearing a proposal last week to raise up to Rs 50,000 crore in FY24. This amount would be mopped up from domestic and foreign markets. In its communication to the stock exchange, SBI mentioned the decision to raise long-term finance through Tier 1 and Tier 2 bonds.

The bond sale could have a base size of Rs 3,000 crore and a green shoe option of Rs 7,000 crore. According to the report, the bond might have a call option after a period of 10 years.

In April-May the bank successfully raised $750 million in bonds. It was issued by the bank’s London branch. It carried a maturity period of five years and a coupon rate of 4.875 which will be payable twice a year. Sources said that the spread between US bonds of similar maturity and those issued by SBI was considered attractive.

That successful venture was highlighted by the SBI to claim that it has created a sound investor base among those looking for fixed-income in the global markets even in phases of high volatility. However, the bank might not venture into the global bond market now since there is volatility in the bond markets following rate hikes by various central banks in the developed economies.

The report quoted an unnamed source who said, “Something should be coming by July; it generally takes around 3-4 weeks to get the government approval. Given the way the forwards are behaving, dollar-denominated bonds don’t make as much sense as INR bonds right now for SBI. They are considering all three options within Tier-1, Tier-2 and infrastructure bonds.”

In September 2022, SBI also started sale of additional Tier 1 bonds.

Meanwhile, HDFC also concluded a debt sale on Monday to raise Rs 13,187 crore at 7.75%.  Also, the National Agriculture and Rural development Bank is planning to raise Rs 5,000 cr through debt.