Home / Business and Economy / SBI Bond Success Spurs Bank Debt Hopes
SBI Bond Success Spurs Bank Debt Hopes
31 Jul
Summary
- SBI successfully sold perpetual bonds, setting a precedent.
- Banks plan fresh debt offerings to boost capital buffers.
- Institutional investors showed strong demand for SBI's bonds.
State Bank of India's recent successful sale of perpetual bonds is creating a positive precedent for other financial institutions in India. This development is expected to encourage similar debt offerings from lenders who are planning to raise capital.
Several banks have perpetual bonds with call options due within the current fiscal year. These impending options may prompt them to explore issuing fresh perpetual debt to bolster their capital reserves. Banks are prioritizing the strengthening of their capital buffers to facilitate credit growth and overall balance-sheet expansion.
SBI raised 46.91 billion rupees through Basel III-compliant additional Tier I perpetual bonds, featuring a call option after five years. The annual coupon rate offered was 7.75%, attracting bids exceeding 60 billion rupees. Investors included provident funds, pension funds, mutual funds, and other lenders, demonstrating resilient institutional demand amidst market volatility.
Over the next eight months of this fiscal year, five major state-run banks, including SBI, have perpetual bonds worth 307 billion rupees scheduled for call options. SBI alone has 140 billion rupees in bonds due for a call option, while Union Bank of India and Canara Bank have 60 billion and 40 billion rupees respectively.
