The largest lender in the nation, State Bank of India (SBI), plans to issue additional tier I bonds (AT1) in the coming week in order to raise up to Rs 10,000 crore in capital. But the significant increase in yields over the past two weeks has made locking in at higher yields more expensive.
According to sources in the debt market, the raising of AT1 bonds, initially slated for July 13, would serve two purposes: it will assist company expansion and replace instruments (bonds) that are approaching maturity. Based on the market yield level, which has risen over the past two weeks, the bank would decide on the actual bond issuance.
According to information from Clearing Corporation of India (CCIL) and CARE Ratings, the yield on the benchmark 10-year Government of India bonds ended at 7.15–16% at the end of the week (July 07), down from 7.07–% two weeks prior (June 23).
SBI officials stated that of the planned bond issuance of Rs 50,000 crore for FY24, Rs 20,000 crore will be AT1 bond offerings, including the scheduled sale this week.
Additionally, it intends to issue tier-II bonds for a total of Rs 10,000 crore in 2023–2024, with the remaining funds coming from infrastructure bonds. The idea to issue bonds this year has received board approval. According to Basel III standards, the rating firm Crisil has given Tier I Bonds an “AA+” rating.
In the first quarter, banks raised a total of Rs 6,635 crore through tier-II and infrastructure bonds, according to statistics from the JM Financial Services group. Between April and June 2023, no new tier-I bonds were issued.
Banks raised a total of Rs. 1.13 trillion through bonds in FY23. Out of which Tier II bonds were issued for Rs 59,686 crore, infrastructure bonds for Rs 19,900 crore, and AT 1 bond for Rs 34,394 crore. In FY23, SBI issued AT1 bonds for a total of Rs 15,133 crore.