SBI To Raise $3 Billion Through Debt In FY25

The State Bank of India (SBI), the country’s largest public sector bank, is set to raise up to $3 billion through debt instruments in FY25. This move aims to strengthen its capital base and support its lending operations amid growing credit demand.

Fundraising Details

SBI’s board has approved the plan to raise funds through a combination of long-term bonds, including Basel III-compliant Additional Tier-1 (AT-1) bonds and Tier-2 bonds. These debt instruments may be issued in both domestic and international markets, allowing the bank to leverage diverse investor bases. The total amount to be raised through these instruments will be in rupees or other convertible currencies, ensuring flexibility in capital acquisition​.

Purpose and Context

The primary objective behind this fundraising initiative is to meet the burgeoning demand for loans. SBI has reported a steady increase in loan growth, outpacing the growth in deposits. For instance, during the January-March quarter of FY23, SBI’s loan portfolio expanded by nearly 16% y-o-y, while deposits grew by only 9.19%. This trend highlights the need for additional capital to sustain and enhance its lending capabilities​.

Previous Fundraising Efforts

In April 2023, SBI raised $750 million through five-year dollar-denominated bonds with a semi-annual coupon of 4.875% via its London branch. Additionally, in March 2023, SBI secured 37.17 billion rupees through Basel III-compliant AT-1 perpetual bonds at an 8.25% coupon rate

Financial Performance

SBI’s strong financial health supports its aggressive fundraising strategy. The bank reported a remarkable 83% increase in net profit for Q4FY23, driven by a substantial reduction in provisions for bad loans and strong credit growth. This profitability is expected to further enhance investor confidence in the bank’s debt instruments.​ 

Conclusion: SBI’s decision to raise $3 billion through debt in FY25 showcases its proactive approach to capital management and its commitment to supporting India’s economic growth through increased lending. By leveraging both domestic and international markets, SBI aims to ensure it has the necessary financial resources to meet the evolving demands of its customers while maintaining financial stability. This move is expected to not only enhance SBI’s capital adequacy but also solidify its position as a leading player in the Indian banking sector.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.