Home / Companies / News /  SBI raises Rs4,000 crore via AT1 bonds

MUMBAI: The country’s largest lender State Bank of India (SBI) on Wednesday said it has raised Rs4,000 crore via additional Tier 1 bonds at a coupon rate of 7.72%, the first such issuance in the domestic market after the Securities and Exchange Board of India issued new rules. 

In a press release, SBI said it received bids in excess of Rs10,000 crore against a base issue size of Rs1,000 crore.

AT1 bonds, also called perpetual bonds, carry no maturity date but have a call option. The issuer of such bonds may call or redeem the bonds if it is getting money at a cheaper rate, especially when interest rates are falling.

While SBI has AAA credit rating from local credit agencies, the AT1 offering is rated AA+, which is the highest rating in the country for such instruments, given their hybrid and high-risk nature.

SBI was the first lender to raise capital through offshore AT1 bonds in 2016. The latest issuance by the bank has prompted other lenders like Axis Bank to look at an offshore AT1 bond issue to raise as much as $1 billion. Axis Bank will use the proceeds for green and social projects. The bank has set an initial price guidance of 4.4% for the bonds.

Axis Bank is the second Indian lender this year to tap overseas debt markets to raise funds through AT1 bonds. HDFC Bank recently raised $1 billion.

In March this year, SEBI amended a 100-year valuation rule for perpetual bonds. It said deemed residual maturity of Basel III additional tier-1 (AT-1) bonds will be 10 years until 31 March, 2022. It also mentioned that the period will be increased to 20 and 30 years over the subsequent six-month period. From April 2023 onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bond. Residual maturity is the time pending for the bond’s maturity.


Gopika Gopakumar

Gopika Gopakumar has worked for over 15 years as a banking journalist across print and television media. Her expertise lies in breaking big corporate stories and producing news based TV shows. She was part of the 2013 IMF Journalism Fellowship Program where she covered the Annual & Spring meetings of the International Monetary Fund in Washington D.C. She started her career with CNBC-TV18, where she also produced a news feature show called Indianomics and an award winning show on business stories from South India called Up South. She joined Mint in 2016.
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