SBI Raises ₹4,691 Crore Through AT-1 Bonds, Funds To Support Business Growth

Mumbai: State Bank of India (SBI) has raised Rs 4,691 crore by issuing Basel III-compliant Additional Tier 1 (AT-1) bonds. The country’s largest lender will use the money to support its business growth and strengthen its regulatory capital.

This is SBI’s first Tier 1 bond issuance during the ongoing financial year. The bonds carry an annual coupon rate of 7.75 percent, the bank said in a statement on Wednesday.

Strong Demand

The bond issue received a strong response from qualified institutional investors. SBI received 89 bids, with the total demand exceeding two times the base issue size of Rs 3,000 crore.

Following the strong demand, the bank decided to accept Rs 4,691 crore at an annual coupon rate of 7.75 percent.

Investors participating in the issue included provident funds, pension funds, mutual funds and banks. The wide participation showed strong interest from different categories of institutional investors.

SBI Chairman C S Setty said the broad participation and varied bids demonstrated the trust that investors place in the country’s largest bank.

Bond Details

The AT-1 bonds have a perpetual tenor, which means they do not have a fixed maturity date. However, SBI can exercise a call option after five years and on every anniversary thereafter, subject to the required conditions.

The latest issuance will help SBI raise long-term, non-equity regulatory capital. It will also diversify the bank’s sources of capital while supporting future business expansion.

AT-1 bonds are counted as part of a bank’s core capital under Basel III rules. Banks issue these instruments to improve their capital position and meet global capital adequacy requirements.

These bonds have special loss-absorption features. If a bank comes under severe financial stress, the investment can be written off or converted into common equity, subject to approval from the Reserve Bank of India.

The feature makes AT-1 bonds riskier than regular bonds. However, they usually offer relatively higher interest rates to compensate investors for the additional risk involved.