“Bidding for the debt sale is likely on January 17th. It will be an AT-1 issuance with a call option after 10 years and every year thereafter,” a source aware of the development said.
The AT-1 issuance has a base size of Rs 2,000 crore and a greenshoe option of Rs 3,000 crore, sources said, adding that SBI’s bonds are rated AA+ by rating agencies CRISIL, Care and ICRA.
Given prevailing market conditions, the coupon for SBI’s AT-1 bonds could be set at around 8.25%, sources said. Typically, coupon rates for SBI’s bond issuances are the lowest in the banking sector, given the bank’s government ownership and status as the county’s largest lender.
On Wednesday, yield on the 10-year benchmark government bond was last trading at 7.22% in the secondary market.
In July 2023, SBI had raised Rs 3,101 crore through AT-1 bonds. Subsequently, the bank had issued two tranches of infrastructure bonds worth Rs 10,000 crore each as well as a tier-2 bond worth Rs 10,000 crore.
The lender had in June 2023 received board approval to raise up to Rs 50,000 crore through debt instruments in the current financial year.The banking sector heavyweight has also been active on the overseas front of late. ET had exclusively reported on Wednesday that SBI had concluded a fund-raise worth $1 billion through an offshore syndicated loan earlier this week.
With growth in bank credit having persistently outstripped growth in deposits over the last year-and-a-half, lenders have tapped the bond market to mobilise money to finance the aggressive demand for loans.
Latest Reserve Bank of India data showed that as on December 15, bank credit growth was at 20.2% year-on-year while deposit growth was at 14.0%.
Over the last couple of months, Indian financial market authorities have been examining ways to revive the market for AT-1 bonds, which globally attracted controversy due to investor losses from these instruments following the collapse of Credit Suisse in March 2023.
AT-1 bonds have features which sometimes permit them to be written off before equity, potentially triggering losses worth billions for investors.
In India, however, issuances of AT-1 bonds have witnessed relatively firm demand from investors, especially when the issuers are highly rated public sector entities like SBI.