SBI raises Rs 9,000 crore via this year’s first bond sale

NEW DELHI: State Bank of India Wednesday raised nearly Rs 9,000 crore via a primary bond sale in which India’s two large domestic institutional investors – Life Insurance Corporation and Employees’ Provident Fund Organisation (EPFO) participated, dealers said.

Bonds offered 6.80 percent with 15-year maturity. Investors will have a call option, which can be exercised after 10 years, allowing investors to exit before maturity. The interest rate was marginally higher than the expected range, which is 6.65-6.75 percent.

Investors could not be contacted immediately for comments.


ET reported on Wednesday’s print edition that SBI was raising up to Rs 10,000 crore with expected participation from LIC and EPFO.

In the primary sale that took place Wednesday afternoon on the electronic bidding platform of stock exchanges SBI accepted bids for Rs 8,931 crore, dealers said. This was the lender’s first such bond sale in the calendar year.

These are tier-II bonds that add to the bank’s capital base, measured by capital adequacy ratio. The gauge is compliant to Basel III, an international capital standard.

In the third quarter of the financial year, some repayments of erstwhile tier-II SBI bonds are due. The proceeds of the proposed new issuances would also be used for the repayments.

When a particular set of such bonds is about to mature, a new issuance helps retain the total capital above the capital adequacy floor, mandated by the Reserve Bank of India.

Also, when a bank grows in size and its risk weighted assets increases requiring the lender to raise a greater amount of capital.