Despite strong capital adequacy, India's largest lender gears up for aggressive fundraising
Mumbai: The State Bank of India (SBI) is set to raise up to ₹45,000 crore in FY26 through a mix of debt and equity instruments as part of a broader capital planning strategy. This includes ₹20,000 crore via bonds and up to ₹25,000 crore through qualified institutional placements (QIPs).
SBI’s board recently approved the issuance of Basel III-compliant Additional Tier-I (AT1) and Tier-II bonds worth ₹20,000 crore. Simultaneously, the bank has opened its QIP offer—its first since FY18 when it raised ₹18,000 crore. The floor price for this QIP has been set at ₹811.05 per share, a 2.5% discount to its last NSE closing price of ₹831.70.
Although Chairman C.S. Setty had earlier stated that the bank doesn’t currently need additional capital, he also emphasized that SBI annually seeks board approval to maintain flexibility in raising capital depending on market conditions and growth needs. While the bank’s capital adequacy ratio (CRAR) stood at a healthy 14.25% as of March 2025—well above the regulatory requirement of 12.1%—it still trails behind private players like HDFC Bank (19.6%) and Bank of Baroda (17.2%).
SBI was the largest issuer of bank bonds in FY25, raising ₹27,500 crore—₹5,000 crore via AT1 bonds and ₹22,500 crore through Tier-II bonds in multiple tranches. It’s expected to dominate bond issuances in FY26 as well. AT1 bonds, or perpetual bonds, have no maturity date but come with a call option (typically after five years), and contribute to a bank’s core capital. Tier-II bonds, meanwhile, bolster overall CRAR.
In FY25, public sector banks raised ₹36,500 crore through Tier-II bonds, part of the ₹37,870 crore mobilized industry-wide. SBI and Canara Bank together raised ₹8,000 crore via AT1 bonds.
Experts suggest that overall bond issuances—especially AT1 and Tier-II instruments—may be more subdued in FY26, citing slower credit growth. AT1 bonds, once popular among private banks, saw a decline in investor confidence after the Yes Bank debacle in 2020, which involved a complete write-down of such bonds.
Anil Gupta, SVP & Co-Group Head, Financial Sector Ratings at ICRA Ltd., noted that FY25 saw record bond issuance worth ₹1.3 lakh crore, with over ₹90,000 crore in infrastructure bonds. Public sector banks accounted for about 60% of these, while private banks' share fell sharply to just 7% from the usual 40%.
Gupta added that many banks are well-capitalized and are likely to rely on internal accruals for their growth, further reducing the need for fresh bond issues. He expects PSBs to dominate the limited issuance volume in FY26.
Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP, attributed the slow start to bond issuances this year to surplus liquidity in the banking system. With deposit inflows strong and credit demand moderate, most banks are not in a rush to raise debt capital. This is evident in the soft short-term money market rates and low overnight borrowing costs.
Srinivasan also observed that no PSU bank has tapped the bond market so far in FY26, in contrast to the ₹39,000 crore raised during the same period last year.
Given the tepid investor appetite for AT1 bonds—which carry higher risk and potential loss-absorption features—PSU banks are increasingly looking at QIPs as a safer and more attractive alternative. QIPs not only bolster CET1 capital but also help the government in its disinvestment goals by gradually diluting public ownership.
Several public sector banks have already leveraged this route:
Punjab National Bank raised ₹5,000 crore via QIP in September 2024
Bank of Maharashtra followed with ₹3,500 crore
Indian Overseas Bank closed a ₹1,436 crore QIP in March 2025
UCO Bank, Punjab & Sind Bank, and Central Bank raised about ₹2,000 crore collectively in Q4 FY25
In this evolving capital-raising environment, SBI’s dual-pronged strategy reflects a careful balance between maintaining market leadership and preserving flexibility to respond to dynamic financial conditions.
