 "SBI raises ₹7,500 cr through Tier-II bonds at a tight coupon of 6.93%")
Country’s largest lender State Bank of India (SBI) on Friday raised ₹7,500 crore through tier-II bonds at a coupon rate of 6.93 per cent, making it the largest bond issuance by a bank in 2025-26 (FY26).
The bonds have a tenor of 10 years, with call option after five years and each anniversary date thereafter. The bonds are rated AAA by domestic rating agencies.
Market insiders said the issue was very tightly priced, as expectations were that it would be in the range of 6.95-7 per cent. However, the final pricing came in 7 basis points (bps) lower than the upper end of that range, they added.
“The issue attracted an overwhelming response from investors, with bids approximately three times against the base issue size of ₹5,000 crore. The total number of bids received was 101, indicating participation from a diverse set of qualified institutional bidders. The investors were across provident funds, pension funds, mutual funds, banks, etc.”, SBI said in a statement.
The base issue was for ₹5,000 crore, and the green shoe option was ₹2,500 crore. Tier-II bonds are a type of debt instrument issued by banks to strengthen their capital base under Basel-III norms. They form part of a bank’s tier-II capital, which is considered “supplementary” capital as it is less secure than tier-I capital like equity or perpetual bonds.
SBI Chairman C S Setty said that wider participation and heterogeneity of bids demonstrated the trust investors place in the country’s largest bank. Based on the response, the bank has decided to accept ₹7,500 crore.
Back in June, ICICI Bank – country’s second-largest private sector lender – had raised ₹1,000 crore at a coupon of 7.45 per cent. The base issue was ₹500 crore and had a green shoe option of ₹500 crore. The tier-II bonds have a maturity of 15 years, with a call option available after 10 years.
Banks have been noticeably absent from the domestic debt capital market since the start of FY26, which has dampened overall corporate bond market activity so far. However, with SBI raising ₹7,500 crore at a very tight rate, the expectation is that many other banks will follow suit and tap the market for tier-II bonds. This should help boost overall fundraising through bonds, and drive faster growth in the current quarter (Q3FY26).
Indian companies raised over ₹5.47 trillion through bonds in the domestic debt market during the first half of 2025-26 (H1FY26). While fundraising was robust in Q1FY26, with ₹3.44 trillion mobilised amid lower yields, activity slowed in Q2, with ₹2.03 trillion rung up as yields hardened due to global and domestic factors.
Tapping the market
- Issue was expected to be in the range of 6.95-7%
- Final pricing came in 7 bps lower, making it tightly priced
- Base issue was for ~5,000 cr and green shoe option was ₹2,500 cr
- Lender added that a total of 101 bids were received