SBI Card to raise up to Rs 2,000 crore in capital via Tier II bonds

CRISIL Ratings has assigned its "AAA/Stable" rating to the Rs 2,000 crore non-convertible debentures and Rs 2,000 crore lower Tier II bonds

(This report has been updated)

SBI Cards and Payment Services (SBI Card) is planning to raise up to Rs 2,000 crore in capital through Tier-II bonds to shore up capital adequacy.

The Gurugram-based unit of State Bank of India (SBI) is also looking to raise Rs 2,000 crore through non-convertible debentures (NCDs) to support business growth.

The card company saw a big dent in its capital adequacy of about 4.9 per cent. This came after the Reserve Bank of India (RBI) hiked risk weights on unsecured credit in November 2023. Its capital adequacy stood at 18.4 per cent at the end of December 2023 from 23.3 per cent in September 2023.

CRISIL Ratings has assigned “AAA/Stable” ratings to the Rs 2,000-crore NCDs and Rs 2,000-crore lower Tier-II bonds.

It has reaffirmed ratings on the existing debt instruments and bank facilities of the company.

In response to Business Standard queries, SBI Card said raising funds through long-term/short-term sources is a part of the ongoing business activity. It depends on various factors like asset-liability management (ALM) requirements, prevailing interest rates and market conditions.

“The company is well capitalised and has access to diverse funding sources. We tap into such sources based on market conditions and competitive pricing,” SBI Card said. SBI holds 68.3 per cent stake in the company.

According to CRISIL, around 81 per cent of the company’s borrowings are in the form of bank loans.

Focus on diversification in the borrowing mix with a higher share of capital market instruments, among others, is expected to benefit in the long run. Its total assets stood at Rs 55,863 crore at the end of December 2023.