The bank aims to raise up to ₹7,500 crore through the offering, which has a base issue of ₹5,000 crore and a green-shoe option of ₹2,500 crore. The bonds will carry a five-year call option, one of the persons said. “The bond issue is likely to come this week, with bidding expected on Friday.”
SBI Capital Markets Ltd is arranging the issue. An email seeking comment from SBI went unanswered at press time. The proceeds would likely be used to meet regulatory requirements and support business growth, the people said.
If successful, the deal would mark the first major domestic bond issuance by a public sector bank this financial year and could signal other lenders to return to a market that has seen few offerings in recent months.
“Banks remained on the sidelines of the bond market, choosing not to tap for fresh capital because of comfortable liquidity positions, stable deposit growth, and subdued credit demand from corporates…this further depressed overall issuance volumes, especially in the tier-1 and tier-2 capital bond segments that normally bolster monthly mobilisation figures,” Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP said.
The bank is expected to offer a coupon rate of 6.90–6.95% for the upcoming tier-II bond sale, the people cited above added.
Tier-II bonds are subordinated debt issued by banks to raise capital and meet regulatory requirements. In the event of a bank’s liquidation, these bonds are repaid after senior debt holders but before equity holders. They are considered riskier than senior bonds but typically offer higher yields than many other fixed-income investments.
“This will be the first domestic bond issue by SBI in the current financial year. They had plans to raise funds in August but they deferred it because of elevated levels, so that’s why they are coming now,” the first person said.
Currently, the yield on the 10-year benchmark is 6.51%. Government bond yields had peaked at 6.64% in August amid uncertainty over US tariffs on India and fading hopes of further rate cuts by the Reserve Bank of India (RBI).
SBI’s bonds usually carry the lowest coupons among bank-issued debt instruments, reflecting investor perception of the bank’s safety, given its size and government ownership.
Mint earlier reported that after a muted September quarter, India’s corporate bond market is seeing a revival, with major borrowers lining up to raise funds as yields begin to soften following dovish signals from the Reserve Bank of India.
The last time SBI tapped the corporate debt market was in September 2024, when it raised ₹7,500 crore via 15-year tier-II bonds at a 7.33% coupon. In FY25 (April–March), the bank issued three batches of 15-year infrastructure bonds, raising ₹30,000 crore, and raised ₹10,000 crore each through tier-I and tier-II bonds.
This planned tier-II issuance comes on top of other funding SBI secured this year, including $500 million via five-year dollar bonds at a 4.50% coupon and ₹25,000 crore through a qualified institutional placement. The bank has board approval to raise ₹20,000 crore via tier-I and tier-II bonds in FY26.
As of end of June, SBI’s loan book remained robust, with gross advances rising 11% year-on-year to ₹42.5 trillion, slightly lagging deposits, which increased 11.66% to ₹54.73 trillion.
The state-owned bank’s capital adequacy ratio was at 14.63% at the end of June, of which CET-1 ratio and tier-1 ratio were at 11.10% and 12.45%, respectively. In comparison, the largest private sector lender, HDFC Bank’s capital adequacy ratio was at 19.9%. Of which CET-1 ratio was at 17.4% and tier-1 was at 17.8% as at June end.
Why banks have stayed away
Credit growth across the banking sector has remained subdued, discouraging many lenders from raising fresh long-term debt. Demand for loans in the first half of this year has been slightly tepid, particularly from companies increasingly turning to bonds and commercial paper instead of bank credit.
As of 19 September, non-food credit growth in India was about 10% year-on-year, down from 13.6% a year earlier, according to the RBI. Deposits rose 9.5% over the same period.
For banks, the cost of liabilities remains high, and yields in the debt market have hardened. Even after recent policy rate cuts, transmission to lending rates has lagged, limiting banks’ ability to expand credit affordably.
In FY25, banks raised a total of ₹1.32 trillion via bonds, according to rating agency Icra Ltd, including ₹29,400 crore through tier-II bonds, ₹8,000 crore through tier-I bonds, and ₹94,488 crore via infrastructure bonds.
Against this backdrop, SBI’s move to test the market with a relatively large tier-II bond issue signals confidence in its funding position and franchise strength, experts said, noting that the bank may also be aiming to strengthen its capital buffer.
