MUMBAI: State Bank of India (SBI) will seek to raise as much as 75 billion rupees (US$811.4mil) this week, three bankers say, marking the second rupee debt sale this fiscal year by the country’s biggest lender.
SBI will issue the Basel III-compliant Tier-II bonds with a 10-year maturity and has invited bids today, the bankers, who are familiar with the matter, said.
These bonds are debt instruments issued by banks to strengthen their Tier-II capital, a component of the regulatory capital required under the Basel III framework implemented by the Reserve Bank of India.
The bonds will have a call option at the end of five years, and at the end of every year thereafter, the bankers added.
They also said that mutual funds are likely to bid aggressively for the issue as it would be priced in line with the five-year paper.
In October, SBI raised 75 billion rupees through 10-year Tier-II bonds at a coupon rate of 6.93%, which was only 30 basis points above the annualised 10-year government bond yield.
Other state-run banks that have raised funds via this route include Bank of India, Indian Overseas Bank and Canara Bank, while ICICI Bank is the lone private lender to opt for Tier-II bonds twice in this financial year.
“Better pricing for this issue could also nudge a couple of state-run lenders to opt for this route,” one of the bankers said. — Reuters
