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Current Affairs

SBI raises Rs. 1,251.30 crore by issuing Basel III-compliant tier-I bonds

Date: 23 March 2019 Tags: Banking Schemes & Policies

The country's largest lender State Bank of India (SBI) has raised Rs. 1,251.30 crore by issuing Basel III-compliant additional tier-I bonds. The proceeds from these bonds will help SBI to boost its additional tier 1 capital ratio to meet systematically important bank (D-SIB) criteria to which SBI is mandated to meet.

SBI-Basel III-compliant tier-I bonds

These bonds allotted to investors are in nature of taxable, perpetual, subordinated, unsecured. They are Basel lll compliant for inclusion in additional tier 1 capital. These bonds have face value of Rs 10 lakh each and carry coupon of 9.45% payable annually with call option after five years.

Background

Reserve Bank of India (RBI) has classified SBI along with ICICI and HDFC as domestic domestic systematically important bank (D-SIBs), which are too big to fail. These three banks are needed to comply most stringent capital rules by April 1, 2019.

They are required to keep aside additional common equity tier 1 (CET1) requirement in addition to capital conservation buffer. Tier 1 capital is calculated as common equity Tier 1 (CET1) capital plus additional Tier 1 capital (AT1).