The State Bank of India (SBI) is planning to raise ₹5,000 crore through tier-II bonds by August, according to a report. The move is part of the bank’s efforts to strengthen its capital base and meet the regulatory requirements. Tier-II bonds are a type of debt instrument that banks use to raise capital, which can be used to meet their capital adequacy requirements.
The report cites sources familiar with the development, stating that the initial level talks have already started. The bank is expected to file the necessary documents with the regulatory authorities soon. The fundraising plan is subject to market conditions and regulatory approvals.
SBI’s plan to raise capital through tier-II bonds is seen as a positive move, as it will help the bank to improve its capital adequacy ratio (CAR). The CAR is a measure of a bank’s capital strength, and it is calculated by dividing the bank’s capital by its risk-weighted assets. The Reserve Bank of India (RBI) has set a minimum CAR requirement of 11.5% for banks, and SBI’s current CAR is around 12.6%.
The fundraising plan is also expected to support SBI’s business growth plans. The bank has been expanding its loan book and has seen significant growth in its retail and corporate lending businesses. The additional capital raised through the tier-II bonds will provide the bank with the necessary resources to support its growth plans and meet the increasing demand for credit from its customers.
The report also notes that SBI is not the only bank planning to raise capital through tier-II bonds. Other public sector banks, such as Bank of Baroda and Canara Bank, are also planning to raise capital through similar instruments. The move is seen as a sign of the improving financial health of the public sector banks, which have been struggling with high levels of non-performing assets (NPAs) in recent years.
Overall, SBI’s plan to raise ₹5,000 crore through tier-II bonds is a positive development for the bank and the banking sector as a whole. It will help the bank to strengthen its capital base, support its business growth plans, and meet the regulatory requirements. The move is also expected to boost investor confidence in the bank and the sector, which has been impacted by the COVID-19 pandemic and the resulting economic slowdown.