State Bank of India (SBI) on Wednesday raised funds worth Rs 3717 crores at a coupon rate of 8.25 percent through Additional Tier 1 bond issuance. The term of these bonds is perpetual with a call option after 10 years and every anniversary thereafter.

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"The proceeds of bonds will be utilised in augmenting Additional Tier 1 Capital and the overall capital base of the Bank and strengthening capital adequacy in accordance with RBI Guidelines," SBI said in a release.

The issue attracted investors with bids of Rs. 4537 crores and was oversubscribed by about 2.27 times against the base issue of Rs 2000 crores.

"The total number of bids was 53 indicating wider participation. The investors were across provident and pension funds and insurance companies. Based on the response, the Bank has decided to accept Rs. 3717 crores at a coupon rate of 8.25 percent payable annually. This represents the spread of 66 bps over the corresponding FBIL G-Sec par curve on March 8, 2023," the statement said.

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AT-1 bonds are a type of perpetual debt instrument that banks use to augment their core equity base and thus comply with Basel III norms. These bonds were introduced by the Basel accord after the global financial crisis to protect depositors.

"We believe that this issuance may help in developing a long-term Additional Tier 1 bond curve and encourage banks to effectively manage their Additional Tier 1 capital, " the bank said in the release.

"This issuance is also very significant as the Bank has been able to successively diversify and raise long-term Additional Tier 1 capital with a call option after 10 years and this will help the bank in managing its capital adequacy effectively," the release added.

The Bank had earlier raised Additional Tier 1 Bonds worth Rs. 4,544 crores on February 21, 2023 at a spread of 71 bps over the corresponding FBIL G-Sec par curve on the date of bidding. The Bank has AA+ with a stable outlook credit rating from domestic credit rating agencies for these instruments.

Last year, SBI had said it will raise fresh additional tier 1 (AT1) Capital up to an amount of Rs 10,000 crore, subject to the government of India's concurrence. The fundraising would help the bank grow its loan book.

Of the total outstanding of the Bank’s Additional Tier 1 Bonds is Rs. 49,842.70 crores, Basel III AT1 bonds with a call option of 5 years is Rs. 41,581.70 crores and AT1 bonds with a call option of 10 years is Rs 8,261 crores.

SBI has 22,381 branches and 65,650 ATMs / ADWMs in India with 70,258 business correspondent outlets. It commands a market share of 33.3 percent in home loans and 19.4 percent in auto loans.

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