SBI to raise Rs1,000 crore in Tier-II bonds

The State Bank of India, the country's largest lender, will sell bonds worth Rs500 crore to retail and institutional investors with an option to retain oversubscription for another Rs500 crore. SBI will use proceeds from the Rs1,000 crore issue of Tier-II bonds to enhance its capital adequacy ratio (CAR).
 
The issue will have two options - Series 1, having a maturity of 10 years with a coupon of 9.25 per cent paid annually. It will have a call option after five years and one day with 0.5 per cent additional step-up after five years, in case the call option is not exercised by SBI.

Similarly, in case of Series 2, which will have a maturity of 15 years, it will provide a coupon of 9.5 per cent annually. It will have a call option after 10 years and one day with 0.5 per cent additional step-up after 10 years if the call option is not exercised. This means that in case the call option is not exercised by SBI, the coupon on bonds shall be increased by 0.50 per cent for the balance tenor of the bonds. The minimum investment in these bonds is Rs10,000.
 
Analysts expects the bonds to attract oversubscription, considering the attractive rate at which it has priced the issue. Investment bankers are also optimistic about the success of the issue.
 
The issue will open for subscription on 18 October and close on 25 October, with an option to close earlier and /or to extend up to a period as may be determined by ECCB.

There will not be any TDS since the bonds are listed on NSE and will be compulsorily issued in dematerialised form, so investors without demat a/c will not be eligible.
 
The interest received on these bonds will be treated as income from other sources and shall form a part of the total income of the assessee in that financial year in which they are received. There are no tax benefits for investing in these bonds.
 
Resident Indian individuals, HUF, partnership firms, corporates, banks, financial institutions, insurance companies, mutual funds, provident/superannuation/ gratuity/ pension fund, private/public religious / charitable trust, co-operative society can invest in these bonds.