SBI to Redeem Rs 7,000 Cr Tier-II Bonds Early; To Raise Rs 20,000 Cr via AT1 and Debt Instruments in FY26

The State Bank of India (SBI), the country's largest lender, has announced its intention to redeem Rs 7,000 crore worth of 6.24% Tier-II bonds well before their scheduled maturity. Originally issued on September 21, 2020, with a ten-year maturity set for September 2030, the bank has decided to exercise the call option on September 20, 2025, effectively redeeming these bonds five years early.

As per SBI's official notification, the record date for determining eligible bondholders for this early redemption has been set as September 5, 2025.

SBI Board Approves Fresh Capital Raise of Rs 20,000 Crore for FY 2025-26

In line with its capital planning strategy, SBI's board has also approved a proposal to raise up to Rs 20,000 crore through debt instruments in FY 2025-26. This capital will be mobilised via Additional Tier-I (AT1) and Tier-II bonds, with an estimated Rs 5,000 crore allocated for AT1 instruments and Rs 15,000 crore for Tier-II bonds.

The bank stated that the exact timing, structure, and coupon rates for these issuances would be based on prevailing market conditions, investor appetite, and regulatory considerations. These bonds are expected to help SBI maintain a strong capital buffer while supporting its growth and lending capacity.

SBI Capital Adequacy and Basel-III Compliance

As of the quarter ending June 2025, the State Bank of India (SBI) reported a Capital Adequacy Ratio (CAR) of 14.63%. This comprised Common Equity Tier-I (CET-1) capital at 11.10%, Additional Tier-I (AT1) capital at 1.35%, and Tier-II capital at 2.18%. These figures indicate that SBI remains well-capitalised and compliant with the regulatory norms under the Basel-III framework.

Following a successful equity capital raise of ₹25,000 crore from institutional investors earlier this year, the bank's CAR is projected to improve further to 15.33%, ensuring adequate buffers well above the minimum regulatory requirements under Basel-III norms.

As per the Reserve Bank of India (RBI) guidelines, banks in India are required to maintain a minimum Tier-II capital level of 2% within their overall capital adequacy ratio. While Tier-II instruments are subject to being written down in the event of a bank reaching the Point of Non-Viability (PONV), rating agency Crisil Ratings has stated that such a scenario remains highly unlikely in India, given the country's strong regulatory oversight and prompt corrective mechanisms by the RBI.

Decline in SBI's Tier-II Capital Base Over Three Years

Over the past three financial years, the State Bank of India (SBI) has seen a gradual decline in its Tier-II capital base, although it continues to remain within the regulatory compliance limits. As of March 2023, the Tier-II capital stood at 2.62%, which decreased to 2.35% by March 2024, and further dropped to 2.14% by March 2025. Despite this downward trend, the bank has maintained its capital adequacy in line with Basel-III requirements.

This reduction reflects a rebalancing of the bank's capital structure, partly in response to market dynamics, investor sentiment, and regulatory considerations. Despite this moderation, the bank's overall capital position remains robust.