Overview:
State Bank of India (SBI), the country’s largest lender, is set to issue its first domestic bank bond of FY26, targeting up to ₹7,500 crore through 10-year tier-II bonds. The base issue is ₹5,000 crore, with a green-shoe option of ₹2,500 crore. The bonds will carry a five-year call option, and bidding is expected this Friday. SBI Capital Markets Ltd is arranging the offering.
Purpose and Market Context
- Proceeds are likely to meet regulatory requirements and support business growth.
- If successful, the issue could signal a return of banks to the domestic debt market, which has seen limited activity in recent months.
- Analysts note that banks have largely stayed away due to comfortable liquidity, stable deposits, and subdued corporate credit demand.
“This will be the first domestic bond issue by SBI in FY26. Plans to raise funds in August were deferred due to elevated rates, so the issuance is coming now,” said a source familiar with the matter.
Coupon and Yield Expectations
- The coupon rate is expected between 6.90–6.95%.
- For comparison, the 10-year benchmark yield currently stands at 6.51%.
- SBI bonds are traditionally perceived as low-risk, reflecting confidence in the bank’s size and government ownership.
SBI’s Funding History
- Last domestic bond: ₹7,500 crore via 15-year tier-II bonds in September 2024 at 7.33% coupon.
- FY25 fundraising:
- ₹30,000 crore via 15-year infrastructure bonds
- ₹10,000 crore each via tier-I and tier-II bonds
- FY26 approvals: Board cleared ₹20,000 crore for tier-I and tier-II bonds.
- Additional 2025 funding: $500 million via 5-year dollar bonds at 4.5% and ₹25,000 crore via qualified institutional placement.
Banking Sector and SBI’s Position
- SBI’s loan book: ₹42.5 trillion (up 11% YoY)
- Deposits: ₹54.73 trillion (up 11.66% YoY)
- Capital adequacy: 14.63% (CET-1: 11.10%, Tier-1: 12.45%)
- HDFC Bank comparison: CAR 19.9% (CET-1: 17.4%, Tier-1: 17.8%)
Why issuance matters:
- Credit growth remains subdued, with corporates increasingly using bonds and commercial paper.
- Tier-II bonds help strengthen the bank’s capital buffer, supporting regulatory compliance and long-term growth.
- Experts see this as a confidence signal from SBI to the market.
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.