SBI to raise Rs 25,000 crore in AT1, tier II capital in current fiscal

The country’s largest lender State Bank of India will raise Rs 25,000 crore in capital through additional tier-1 (AT1) and tier-II bonds from markets in FY21. This capital is expected to strengthen the bank’s capacity to growth business and create buffers to withstand shocks.

The lender will raise AT1 and Tier-2 capital by way of issuance of Basel III compliant debt instruments in dollar and domestic currency this financial year.

In exchange filing, said its board has approved raising fresh AT1 capital up to Rs 4,000 crore, subject to the government of India’s concurrence. Its directors also gave the go-ahead to raise fresh tier-II capital up to Rs 10,000 crore. shares closed 1.2 per cent lower at Rs 183.85 per share on the BSE.

It will redeem existing tier-II bonds of Rs 11,015 crore that have call dates during the current financial year FY21. It will replace them by raising fresh tier-II capital bonds of same amount. This would be over and above Rs 10,000 crore worth tier-II capital bonds for which board has given approval, said.

SBI’s the Capital Adequacy Ratio (CAR) stood at 13.06 per cent as on March 31, 2020, with Tier-I at 11 per cent. The bank holds capital above the regulatory requirements.

At the time of announcing results for FY20, SBI chairman had said bank does not intend to approach the government or market to raise capital for now. However, the bank has an enabling provision to raise up to Rs 20,000 crore.

According to SBI’s annual report bank is identified as Systemically Important Bank – Domestic by the Regulator and is required to keep additional Common Equity Tier 1 (CET1) of 0.60% of Risk weighted Assets (RWAs). Additionally, it has also started maintaining Capital Conservation Buffer (CCB) in a phased manner and has to reach level of 2.5% as on 30th September, 2020.

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