Encouraged by the overwhelming responses to its initial Rs 1,000 crore retail bond issue, State Bank of India (SBI), the country’s largest bank, has decided to raise Rs 10,000 crore through the instruments till March 2012. The bank has already received approval from the capital market regulator Sebi.
However, during the current fiscal, the bank is getting ready to mobilise Rs 2,000 crore through the retail bonds. The bank will be launching Rs 1,000 crore retail bond issue with a green shoe option of additional Rs 1,000 crore.
Though the details about the coupon rates and other features are yet to be finalised by the bank, sources in the bank said the new issue of retail bonds would have some different features than the first one launched in October 2010.
Talking about the change in some features of the bond issue, the official said that there wouldn’t be any step-up option on rates for the second bond issue which may launched in March 2011.
The step up option allows the bank to revise rates on the bond after a few years, factoring the volatility of rates in the system .
In the first issue, which was oversubscribed by 19 times, the bank had issued bonds having a face value of Rs 10,000. The bonds were be issued in two series ? Series I was of 10 years duration and carried a coupon rate of 9.25 % and Series II was of 15 years duration and carried a coupon rate of 9.50 %. Interest was payable annually. Interest on the bonds would be subject to tax at the normal rates of tax.
The bank could exercise a call option (where the bank can recall the bonds) after 5 years for Series I, and after 10 years for Series II. If the call option is not exercised, then in both cases, the step up coupon rate was 0.5 %.
The minimum application amount was Rs 10,000 and in multiples of Rs 10,000, thereafter. That was the first time that a bank was issuing Tier II bonds to retail investors. Usually, such bonds are privately placed with institutional investors..
SBI chairman OP Bhatt had earlier said,?The retail bonds not only give depositors an additional investment avenue, but also help the bank address the problem of asset liability mismatch.?