State Bank of India on Friday raised Rs 7,500 crore through Tier 2 bonds maturing in 10 years. This is the first major bond issuance by a bank in the current financial year. The cut-off came at 6.93%, which is lower than market expectations, said dealers.
Market participants expected cut-off yields in the range of 6.95-7.00%. With softening of G-Sec yields and positive market sentiment on expectation of a rate cut, cut-off yields came lower-than-expected levels and the issuance received a robust demand, they said. SBI’s issuance included base issue of Rs 5,000 crore and a green-shoe option of Rs 2,500 crore.
“The issue attracted an overwhelming response from investors with bids approximately three times the base issue size of Rs 5,000 crore. The total number of bids received was 101, indicating participation from a diverse set of qualified institutional bidders. Investors were across provident funds, pension funds, mutual funds and banks,” SBI said in a release.
“The wider participation and heterogeneity of bids demonstrated the trust investors place in the country’s largest bank,” said Chairman CS Setty.
Banks stayed away from the bond market so far in FY26 because of ample liquidity and muted credit growth. The better cut-off rates will encourage more banks to tap the market, said dealers.
National Bank for Agriculture and Rural Development (Nabard), too, tapped the market on Friday, raising Rs 6,825.5 crore, slightly lower than the planned issuance of Rs 7,000 crore. The cut-off was 6.71%.