SBI to raise AT-1 capital of Rs 4,000 crore, Tier-2 capital of Rs 10,000 crore

These bonds will be replaced by fresh Tier-2 capital bonds of the same amount, the bank said.

State Bank of India’s (SBI’s) board has approved the raising of Rs14,000 crore through issuance of debt instruments, in an attempt to further strengthen its capital ratios.

The board gave its approval to raise Rs 4,000 crore Additional Tier-1 (AT-1) capital and Rs 10,000 crore Tier-2 capital, SBI said on Wednesday. The announcement came a day after the lender got approval from shareholders to raise Rs 20,000 crore at its annual general meeting (AGM).

The SBI board has also approved to redeem existing Tier-2 capital bonds worth Rs 11,015 crore, having call dates during financial year 2021. These bonds will be replaced by fresh Tier-2 capital bonds of the same amount, the bank said.

The public sector bank has capital adequacy ratio of 13.06% till March 2020 and want to improve it further. At the AGM, chairman Rajnish Kumar said the lender endeavoured to maintain capital adequacy ratio of more than 13.1% from October 1. “We will be endeavouring to maintain capital adequacy ratio 1% above regulatory requirement of 12.1% from October 1,2020,” he said.

Kumar also said the bank aimed 8% loan growth and a net interest margin (NIM) of around 3.2% in the current financial year.

Many banks like SBI have announced to raise capital to absorb the Covid-19 shock and strengthen their balance sheets.

Public sector lender Punjab National Bank (PNB), last week, approved the raising of Rs 10,000 crore capital through share sale and Tier-2 bonds. ICICI Bank had earlier announced to raise Rs 15,000 crore through share sale.

Private sector lender Axis Bank also announced that it had received its board’s approval for raising funds up to Rs 15,000 crore though issuance of various securities. Similarly, Yes Bank is trying to raise Rs 15,000 crore through follow-on public offer (FPO). The FPO of Yes Bank opened on Wednesday and will close on Friday.

SBI had promised to make investment of up to Rs 1,760 crore in Yes Bank FPO. The public sector lender had already invested Rs 6,050 crore in Yes Bank for picking up 48.21% stake.