State Bank of India (SBI) has unveiled plans to bolster its long-term capital by issuing a AAA-rated tier-2 bond next week. The move comes as the bank aims to raise up to Rs 10,000 crore in response to a strong credit demand.
The bonds are expected to mature in 15 years and come with a 10-year call option. Given SBI's government ownership and its position as India's largest bank, these bonds typically offer the banking sector's lowest coupon rates.
SBI is predicting an over 15% credit growth this fiscal year, driven by retail loans and a considerable corporate loan pipeline exceeding Rs 3.5 trillion. This pipeline includes sectors such as manufacturing, renewable energy, ports, and airports.
In the current fiscal year alone, SBI has gathered Rs 20,000 crore through two infrastructure bond sales with a 15-year maturity. These sales were conducted in late July and September respectively. Additionally, the bank raised an extra Rs 3101 crore from an additional tier-1 bond sale in early July.
Other Indian banks are also turning to this fundraising strategy. Notably, Kotak Mahindra Bank, ICICI Bank, and Canara Bank have all opted for infrastructure bond sales.
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