State Bank of India priced the country’s biggest offering of local-currency Tier 2 bonds yet as the lender boosts its capital buffers amid the worsening financial health of domestic companies.
India’s largest bank will raise 89.31 billion rupees ($1.19 billion) through 15-year bonds that comply with Basel III capital norms, according to a person familiar with the matter. The notes carry a coupon of 6.80 per cent, the lowest pricing on such debt issued by any lender since the country started implementing the stringent capital norms in 2013, data compiled by Bloomberg show.
The lender is selling the bonds at a time when India’s banking sector is saddled with the world’s worst debt pile and needs to beef up capital ratios in anticipation of more soured loans as the coronavirus batters businesses and leaves millions jobless. State Bank last month cut its loan-growth target to 8 per cent from 10 per cent for the year started April 1, and said it will be cautious on boosting credit.
The Tier 2 notes, rated AAA, have a call option at the end of 10 years and every year thereafter, the person said, asking not to be identified as the details are private. The issuance is solely being managed by SBI Capital Markets Ltd.