SBI board to meet on Wednesday for tier-I and II capital raising plans

Plans to double registration for its digital-banking app Yono within next six months, from current base of 24 million

State Bank of India will seek the approval of its board, on Wednesday, to raise capital through additional tier-1 (AT1) and tier-II bonds from the markets in FY21.

This capital is expected to strengthen capacity, boost growth, and create a buffer. The state-owned bank is yet to disclose the amount it plans to raise.

It may issue AT1 and Tier-2 capital through the issuance of Basel-III compliant debt instruments — in dollar and domestic currency — during the present financial year.

Analysts said that at present, AT1 bond instruments do not have many takers in the market following YES Bank’s write-down of AT1 bonds worth Rs 8,415 crore. Though the write-down was in line with Reserve Bank of India regulations for this capital instrument, it also meant investors had to forget getting their investment back.

SBI’s capital adequacy ratio (CAR) stood at 13.06 per cent as on March 31, 2020, with tier-I at 11 per cent. The bank holds capital above regulatory norms.

At the time of announcing results for FY20, SBI Chairman Rajnish Kumar had said that the bank did not intend to approach the government or market to raise capital. 

However, it does have an enabling provision to raise up to Rs 20,000 crore.

According to the annual report, the bank is identified as a ‘Systemically Important Bank – Domestic’ by the RBI, and thus required to keep additional Common Equity Tier-1 (CET1) of 0.60 per cent of risk-weighted assets (RWAs).

In addition, it has started maintaining capital conservation buffer (CCB) in a phased manner and has to reach a level of 2.5 per cent by September 30.

In a separate development, it plans to double registration for its digital banking app YONO from the current base of 24 million, in next six months.

The pandemic has brought into focus the value of contactless digital banking. SBI YONO has achieved sizeable growth through the digital channel by increasing the share of wallet as well as acquiring at scale.

SBI will further scale up YONO, Kumar said while addressing the annual general meeting of shareholders on Tuesday.

The integrated digital and lifestyle platform by SBI, YONO, has crossed 51 million downloads and has 24 million registered users at present. 

It witnesses 5 million logins per day, along with over 4,000 daily disbursals of personal loans.