The State Bank of India (SBI) and Union Bank of India (UBI) have announced huge fund-raising plans in the backdrop of lagging deposit growth and credit growth.

SBI, India’s largest bank, is planning to raise up to $3 billion through a public offer and/or private placement of senior unsecured notes in US dollars or any other major foreign currency in the current financial year.

UBI has firmed up plans to mobilise up to ₹10,000 crore, including ₹6,000 crore by way of equity capital and the balance through bonds.

As of May 17, 2024, all scheduled bank deposits had increased by 13.09 per cent y-o-y, while their credit growth stood at 19.19 per cent, underscoring the gap between deposit and credit growth, per RBI data.

In view of the credit growth is outpacing deposit growth, banks are tapping other avenues (in addition to deposits) to bolster their resources to fund credit growth.

In his latest bi-monthly monetary policy statement, RBI Governor Shaktikanta Das observed that the persisting gap between credit and deposit growth rates warrants a rethink by the Boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained, he added.

State Bank of India

SBI, in an exchange filing, said: “the Executive Committee of the Central Board at its meeting held today has approved, inter alia, to examine the status and decide on long term fund raising in single / multiple tranches of up to US$ 3 Billion under RegS/144A....”

According to Clearstream, a Luxembourg-based international central securities depository (ICSD), Reg S and Rule 144A bonds are types of bonds that allow the issuer to issue these securities without the need to register them under the Securities Act of 1933.

The ICSD said under the Rule 144A, Qualified Institutional Buyers (QIBs) can trade debt securities without registration and review by the Securities and Exchange Commission (SEC). The Reg S bond type is available for offers and trades of securities outside of the U.S.A. to U.S. and non-U.S. QIBs.

Union Bank

UBI, in exchange filing, said its Board of Directors in its meeting held on Tuesday, inter-alia, considered and approved capital plan of the Bank to raise up to ₹10,000 crore.

As per the capital plan, the Bank proposes to raise equity capital up to ₹6,000 crore in tranche(s).

This will be done through public issue (that is Further Public Offer) and/or Rights Issue and/or Private Placements, including Qualified Institutions Placements, and/or Preferential Allotment or a combination(s) thereof to any eligible institutions.

The equity raise will be subject to the approval of Government of India, other regulatory authorities and approval of Shareholders’ of the Bank.

UBI also plans to mop up up to Rs 2,000 crore each via Basel III compliant Additional Tier 1 (AT 1) bonds and Tier 2 Bonds (including foreign currency denominated AT1/Tier 2 Bonds).