State Bank of India (SBI), the nation's largest public sector bank, has announced a significant funding plan for the financial year 2025-26. The bank's board of directors approved a plan to raise up to ₹20,000 crore at its meeting held on July 16, 2025. This fund will be raised through bonds in accordance with Basel-III norms, including Additional Tier 1 (AT1) and Tier 2 bonds.
Capital to be Raised Through Bonds
Under this funding process, SBI will issue bonds in the domestic market and will raise funds only from Indian investors. This bond issue is being undertaken to strengthen the bank's capital structure, enabling SBI to effectively implement its plans for loan distribution and business expansion in the coming period.
What Do AT1 and Tier 2 Bonds Mean?
Additional Tier 1 (AT1) bonds are part of a bank's Basel-III capital and are categorized as high-risk. These bonds are perpetual in nature and may not be paid out if the bank faces financial difficulty. Tier 2 bonds, on the other hand, are less risky and are considered as backup capital for the bank. They are used when there is additional pressure on the bank's capital.
What Benefits Will the Bank Receive from the Funding?
The fund-raising by SBI will improve its Capital Adequacy Ratio. This is likely to lead to positive feedback from rating agencies. Simultaneously, the bank's credit profile in the market will strengthen and its capacity to provide loans will increase. The bank will also be able to reduce its future borrowing costs, which will have a positive impact on its margins.
Good Response Received in the Past
In the previous financial year, i.e., FY2024-25, State Bank had also issued Tier 2 bonds worth more than ₹10,000 crore, which were well-received by investors. At that time also, the bank targeted domestic investors and the issue was oversubscribed.
Share Movement in the Market
Following this news, there was movement in State Bank's shares. On July 16, SBI shares rose by approximately 2.07 percent, reaching ₹833.35. In the past five trading sessions, SBI shares have risen by about 2.50 percent, while in one month, they have recorded a gain of 5.14 percent. Over the past six months, this share has provided a return of approximately 8.74 percent, which is considered better than other banks in this sector.
Time and Decision of the Board Meeting
This important meeting of SBI began at 10 a.m. on July 16, 2025, and lasted until 1:25 p.m. It was in this meeting that the bank gave final approval to the new fund-raising plan. This decision is part of the bank's financial year 2025-26 strategy, under which it aims to expand lending and retail credit by building a b capital base.
Capital Adequacy Ratio Will Improve
Under Basel-III norms, banks have to maintain a minimum capital adequacy. This bond issue by SBI will further strengthen it in this direction. This will bring balance to the proportion of Tier 1 and Tier 2 capital, which is a matter of trust for both investors and regulators.
What it Means for Investors
This news related to funding is considered a positive sign for investors. The confidence in the bank's financial health and future plans is likely to increase, and the shares are expected to strengthen. Simultaneously, it also makes it clear that the bank is strengthening its capital base for long-term growth.
Movement in the Banking Sector
This step by SBI can further accelerate funding activities in the Indian banking sector. Many other banks may also move towards raising funds through bonds in the next few months, which will promote both competition and capital stability throughout the banking sector.
