SBI to hit bond market again to raise Rs 2,000 cr

KOLKATA: The State Bank of India plans to sell retail bonds once again to raise Rs 2,000 crore even as it awaits the government clearance for its proposed Rs 20,000-crore rights issue of shares.

SBI managing director R Sridharan said the bank is likely to hit the retail market by the end of this fiscal. These bonds have a longer tenure up to 15 years and qualify for tier-II capital. He was in Kolkata to attend at an event organised by Ficci.

Mr Sridharan did not specify the size of the bond programme but market sources said it would be in the range of Rs 2,000 crore. The bank has decided to tap this route yet again, enthused by the response it received for its maiden retail bond sale of Rs 1,000 crore in October 2010.

The issue was oversubscribed by 20 times as investors were lured by high returns. The bank had offered 9.25% on a 10-year bond and 9.5% on a 15-year bond.

Market sources said SBI is likely to offer higher coupons on the proposed issue as interest rates hardened further since October. SBI has itself hiked deposit rates a couple of times and is offering 9.25% for deposits for 555 days and 1,000 days.

Despite the success of the retail bonds, no other bank has yet tried out this option as they find this costly. “We could not understand why SBI offered such high rates,” a treasury head with a Mumbai-based public sector bank said.
While SBI is working out the details of the retail bond plan, it has garnered 325 million Swiss franc (around Rs 1,500 crore) via an international bond programme to meet its increasing foreign currency needs. It was a medium-term notes ( MTN) issue in the form of senior debt fixed rate bonds with a maturity of five years.