SBI Plans To Launch Second Tranche of Tier-II Bonds Next Week

The State Bank of India plans to launch a second batch of tier-II bonds worth up to Rs 7,500 crore by next week, according to two people with knowledge about the matter.

While the base size and the greenshoe option of the bond issue are yet to be finalised, long-term investors such as pension funds and Employees' Provident Fund Organisation have lined up for SBI's tier-II bonds, the first of the above-mentioned two people told NDTV Profit.

Market participants expect SBI to price this second tranche of tier-II bonds with a coupon rate of 7.40%. The bonds are rated "AAA" by ICRA and India Ratings and Research.

Last month, SBI raised Rs 7,500 crore through Tier-II bonds maturing in 15 years at 7.42%.

Tier-II bonds are part of a bank's borrowing mix, with less risk than tier-I bonds in the event of a default. Tier-II bonds are considered subordinated debt because they do not have the first claim on assets in the event of bank liquidation.

This could be the state-owned lender's last Tier-II bond issue of the current financial year. So far this year, SBI has raised Rs 20,000 crore through two tranches of infrastructure bonds.