State Bank of India (SBI), the country’s largest public sector bank, announced on Wednesday (June 19, 2024), that its board has approved a plan to raise up to Rs 20,000 crore through long-term bonds in financial year 2024-25.
In a regulatory filing, SBI said, “The Central Board at its meeting held today i.e. 19th June 2024 has, inter alia, accorded approval for raising long term bonds up to an amount of Rs. 20,000 crore through a public issue or private placement, during FY25.”
Following the announcement, SBI’s shares rose by over 1% in the afternoon session. The share price increased by 1.23% to Rs 855, compared to the previous close of Rs 844.60 on the BSE.
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The bank’s market capitalization climbed to Rs 7.59 lakh crore, with a total of 6.46 lakh shares traded, amounting to a turnover of Rs 55.61 crore on the BSE.
In January, SBI secured Rs 5,000 crore through perpetual bonds at an 8.34% interest rate. Last financial year, the bank raised Rs 20,000 crore by issuing 15-year infrastructure bonds.
This month, SBI also raised $100 million via its London branch by issuing three-year senior unsecured floating-rate bonds, priced at 95 basis points above the secured overnight financing rate (SOFR).
Indian banks have been strengthening their capital reserves to accommodate the growing demand for loans. This financial year, several state-run banks, including Canara Bank and Punjab National Bank, plan to raise funds through debt issuance.
Last week, SBI approved raising $3 billion through a public offer or private placement of senior unsecured notes in U.S. dollars or other major foreign currencies.
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SBI’s infrastructure bonds, rated AAA with a stable outlook, are exempt from reserve requirements like the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).
This means the full amount can be used for lending. In contrast, deposits would require banks to keep 4.5% with the Reserve Bank of India and invest about 18% in securities to maintain the SLR.
As of March 2024, SBI’s infrastructure loans grew by 5.72% year-on-year to Rs 3.94 trillion. Major sectors included power (Rs 2.04 trillion), ports and roads (Rs 1.12 trillion), and telecom (Rs 30,376 crore).
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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before making any investment decision.
