New Delhi: State Bank of India (SBI), the country’s largest lender, is planning to raise $2 billion through offshore bonds to augment its Additional Tier 1 Capital and overall capital base. The bank has scheduled a meeting on 18 April 2023 to consider the proposal.
SBI is looking to raise the funds through public or private placement of senior unsecured notes in US dollars or any other convertible foreign currency during the financial year 2023-24 under Reg-S/144A. The bank aims to strengthen its capital adequacy in accordance with RBI guidelines.
The bank’s shares have lost almost 15 per cent on a YTD (year-to-date) basis and last traded at Rs 526.30 apiece, down 0.31 per cent or Rs 1.65 on BSE on Monday. This fundraising plan follows the approval SBI received in January this year to raise Rs 10,000 crore via infrastructure bonds during the financial year 2023.
In March, SBI raised Rs 3,717 crore through Tier 1 bonds at a coupon rate of 8.25 per cent. The sale of these bonds was intended to raise the bank’s overall capital base and improve its capital adequacy ratio. It was SBI’s third offering of Tier 1 bonds in the last fiscal year. These bonds have a perpetual tenor with a call option after 10 years and on each anniversary after that.
The capital-raising plan of SBI is in line with the RBI’s guidelines, which require Indian banks to maintain a minimum capital adequacy ratio (CAR) of 11.5 per cent. Banks are required to maintain a Tier 1 capital ratio of at least 9.5 per cent.
SBI’s move to raise offshore bonds comes amid the COVID-19 pandemic and a global economic slowdown. The bank is taking proactive measures to maintain its capital adequacy, improve its credit rating, and attract investors.
In conclusion, SBI’s plan to raise $2 billion through offshore bonds will help the bank strengthen its capital base and improve its capital adequacy ratio. This move is part of SBI’s ongoing efforts to meet the RBI’s guidelines and attract investors amid the pandemic and global economic slowdown.