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State Bank of India (SBI), the country’s largest lender, has raised ₹3,717 crore through its third Basel III compliant Additional Tier 1 (AT1) bond issuance in the current financial year on Wednesday at coupon rate of 8.25%, the lender said on Wednesday.

The proceeds will be used to augment its additional tier 1 capital and overall capital base of the bank and also for strengthening capital adequacy in accordance with RBI guidelines. These perpetual bonds have a call option after 10 years and every anniversary thereafter.

“The issue attracted overwhelming response from investors with bids of Rs. 4,537 crores and was oversubscribed by about 2.27 times against the base issue of ₹2,000 crores. The total number of bids were 53 indicating wider participation. The investors were across provident & pension funds & insurance companies,” SBI said.

Given the high response, the bank has decided to accept ₹3,717 crore at a coupon rate of 8.25 per cent payable annually. This represents spread of 66 bps over the corresponding G-Sec par curve on March 8.

Prior to this bond sale the bank had raised ₹4,544 crore on February 21, 2023, from similar bonds at a spread of 71 bps over the corresponding G-Sec par curve on the date of bidding.

The bank said the issuance is also significant as it could diversify and raise long-term additional tier 1 capital with a call option after 10 years and this will help the bank in managing its capital adequacy effectively.

Of the total outstanding of the bank’s additional tier 1 bond of ₹49,842.70 crore, Basel III AT1 bonds with call option of five years is ₹41,581.70 crore and AT1 bonds with call option of 10 years is ₹8,261 crore.

“We believe that this issuance may help in developing a long term Additional Tier 1 bond curve and encourage banks to effectively manage their Additional Tier 1 capital,” the lender added.

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