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State Bank of India on Thursday said it has raised ₹4,000 crore by issuing Basel-III compliant, tier-II bonds in the nature of debentures on private placement basis.
India’s largest bank issued 40,000 debentures of 10-year tenure of face value ₹10 lakh each at par. The instruments carry a coupon rate of 8.33 per cent and have a call option after five years, the bank said in a notice to the BSE.
SBI’s Committee of Directors in its meeting held on December 21 had authorised the bank to raise up to ₹12,000 crore by way of issue of Basel-III compliant tier-II bonds, at par, through private placement, in such number of tranche(s), at such time (s) as may be considered appropriate and on such coupon(s) as may be decided at the time of actual issuance.
Tier-II bonds under Basel III are characterised by a ‘Point of Non-Viability’ (PONV) trigger due to which the investor may suffer a loss of principal.
According to Care Ratings, PONV will be determined by the Reserve Bank of India and is a point at which the bank may no longer remain a going concern on its own unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern.
In addition, the difficulties faced by a bank should be such that these are likely to result in financial losses and raising the Common Equity tier-I capital of the bank should be considered the most appropriate way to prevent the bank from turning non-viable.
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