Money & Banking

SBI raises ₹4,000 crore via Basel III-compliant AT-1 bonds

Our Bureau Mumbai | Updated on September 09, 2020 Published on September 09, 2020

State Bank of India (SBI) on Wednesday said it has raised ₹4,000 crore via Basel III-compliant Additional Tier 1 (AT-1) bonds at a coupon of 7.74 per cent.

India’s largest bank, in a statement, said 7.74 per cent is the lowest pricing ever offered on such debt issued by any bank since the country started implementing the stringent Basel III capital rules in 2013.

“As the aggregate bids were in excess of ₹6,000 crore, the bank exercised the full greenshoe option of ₹3,000 crore over and above the base issue size of ₹1,000 crore,” it said.

While the AT-1 instrument is perpetual in nature, it can be called back by the lender after five years or any anniversary date thereafter.

Swaminathan J, Deputy Managing Director, SBI, said: “The apprehensions that prevailed in the market post the YES Bank AT-1 writedown in March 2020 have been firmly put behind. The interest payout on such bonds is better than the cost of equity for the banks and it provides a good risk-adjusted return to the investors. It hence offers a win-win situation for both the banks and the investors.”

According to the statement, while SBI has an AAA rating from local credit agencies, its AT-1 offering is rated AA+, which is the highest rating in the country for these instruments, in view of their hybrid and high-risk nature.

The statement said the AT-1 issuance comes in the backdrop of the issue of Tier 2 bonds last month aggregating ₹8,931 croresat 6.8 per cent, which is again the best ever pricing for Tier 2 debt instruments.

Both the issuances were solely managed by SBI’s wholly-owned subsidiary, SBI Capital Markets Ltd.

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Published on September 09, 2020
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