State Bank of India To Tap Up To Rs 18,000 Crore From Bond Market
State Bank of India (SBI) India’s largest bank said it intends to raise Rs 18,000 crore or US$ 3.8 billion by March 2010, in order to meet its capital requirement and fuel business growth the bank said on Tuesday just a day ahead of its Rs 2,000 crore or US$ 400 million bond issue.
The money raised from bonds could take the Capital Adequacy Ratio (CAR) under Basel II well above 14 per cent, SBI Chairman O P Bhatt said while declaring second quarter results for the Indian banking major.
As of September, the CAR of the bank as per Basel I norms was 12.14 per cent while as per Basel II norms it stood at 11.51 per cent. SBI posted 40 per cent growth in net profit for the second quarter of this fiscal on high interest income. On a consolidated basis, SBI posted an 11.50 per cent rise in its net profit at Rs 2,458.04 crore or US$ 491 million for the quarter ending September 30.
In a note to the stock exchange, SBI said it would offer bonds with a minimum maturity of more than 60 months, in tranches through structured deals, private placement or retail participation.
On Monday, SBI set a coupon of 8.90 percent on a 15-year upper Tier-II subordinated debt issue, which it launched on Wednesday. Several Indian banks have stepped up bond sales over the past month to meet Basel II requirements, which by March 2009 aim to match capital reserve requirements to the risks faced by banks.
“Yields are very low and attractive now, but Basel II is also a reason why banks are issuing bonds,” Harihar Krishnamoorthy, treasurer at Development Credit Bank, said.
India’s benchmark 10-year federal bond on Tuesday plunged below 6 percent for the first time since Sept. 2004, having eased from a seven-year high of 9.55 percent touched in early July as falling inflation and slowing growth led the central bank to lower key interest rates.
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