SBI on mega fundraising drive: To raise ₹45,000 cr in debt, equity in FY26

By Admin

17 Jul, 2025

In a significant move to strengthen its capital base and boost financial flexibility, the State Bank of India (SBI) has unveiled plans to raise a whopping ₹45,000 crore in FY26. This fundraising initiative will be split across ₹20,000 crore via bonds and ₹25,000 crore through Qualified Institutional Placements (QIPs). Although SBI’s top brass has emphasized that the bank doesn’t need capital right now, the mega fundraising plan speaks to a strategy that’s both forward-looking and well-calibrated to market conditions.

Why Is SBI Raising Capital If It Doesn’t Need It?

SBI Chairman C.S. Setty clarified that while the bank is not in immediate need of capital to meet CRAR (Capital to Risk-weighted Assets Ratio) norms, the fundraising plan is part of annual capital planning a pre-emptive measure to maintain strong buffers and support growth opportunities. The idea is to maintain flexibility and raise capital when market conditions offer favorable pricing.

As of March 2025, SBI’s capital adequacy ratio stood at 14.25%, comfortably above the regulatory requirement of 12.1%, but still trailing behind private peers like HDFC Bank (19.6%) and Bank of Baroda (17.2%). The bank is looking to bridge this competitive gap, especially in a year where overall bond issuance is expected to be tepid due to softening credit demand and ample liquidity in the system.

Breaking Down the Fundraising Plan

₹20,000 Crore via Bonds

SBI’s board has approved issuance of Basel III-compliant AT1 (Additional Tier-I) and Tier-II bonds. These instruments will not only fortify the bank’s capital structure but also position it favorably to meet any future regulatory or market shocks.

• AT1 Bonds: Often referred to as perpetual bonds, they carry higher risks (and higher returns), have no fixed maturity, and can be written down during stress situations.
  
  

• Tier-II Bonds: Contribute to overall capital and are generally less risky than AT1 instruments.
  
  

In FY25, SBI led the market with ₹27,500 crore raised through bond issuances ₹5,000 crore from AT1 and ₹22,500 crore from Tier-II bonds. This made it the largest bond issuer in the banking sector last fiscal.

₹25,000 Crore via QIPs

The bank has already initiated its first QIP since FY18, setting a floor price of ₹811.05 per share. QIPs are expected to be the preferred route for capital raising, especially as investor sentiment toward AT1 bonds remains subdued following past defaults and write-downs (e.g., Yes Bank in 2020).

QIPs not only bolster CET1 (Common Equity Tier-I) capital but also align with the government’s disinvestment goals, gradually diluting state ownership in public sector banks.

Market Dynamics: Bond Issuances Likely to Slow

According to experts, bond issuance volumes particularly AT1 and Tier-II bonds are likely to decline in FY26 due to several factors:

• Surplus liquidity in the system
  
  

• Moderate credit growth
  
  

• Robust deposit inflows
  
  

• Skepticism around AT1 instruments due to their loss-absorption features and global risk perceptions
  
  

In fact, no PSU bank has tapped the bond market so far in FY26, a sharp contrast to the ₹39,000 crore raised during the same period last year. “There’s no urgency to borrow when liquidity is comfortable,” noted Venkatakrishnan Srinivasan of Rockfort Fincap LLP.

The Big Picture: A Proactive, Not Reactive, Strategy

SBI’s fundraising spree isn’t a reaction to financial stress it’s a strategic play. By securing approvals and initiating fundraising now, SBI is preparing for:

• Future credit expansion
  
  

• Improving capital ratios
  
  

• Taking advantage of favorable market windows
  
  

• Aligning with regulatory and government divestment timelines
  
  

In doing so, India’s largest lender ensures it remains competitive, agile, and ready to fuel the nation’s economic momentum without waiting for a crisis to act.