SBI to float retail bonds in Q3

State Bank of India (SBI) planning to float retail bonds of over Rs 3,000 crore in the third quarter (Q3) of this fiscal year, A K Purwar, chairman, said. The bonds, which are likely to have a tenure of 10 years, will be the largest domestic retail bond issue.

These will be first long term bonds to be floated by an Indian bank. ICICI Bank and Industrial Development Bank of India were allowed to float retail bonds since they were development financial institutions, which later transmuted into banks.

SBI's plan is to convert part of its term deposits into this long-term instrument.

The SBI now offers 6.25 per cent on a five-year deposit and sources close to the bank said the bond could offer 1 percentage point more than this.

"Credit growth has been very robust this year, and we will be acquiring additional capital by the third quarter of this year to keep our capital adequacy at adequate levels," said Purwar, at the sidelines of a banking technology seminar held here today.

The bonds, to be distributed by the 13,000-odd branches of the bank and its seven associates, will be treated as subordinate debt and prop up the bank's capital adequacy ratio.

Purwar reiterated a target of 23 per cent credit growth in 2005-06. SBI is keen to make an acquisition in Asia or Africa this year, reiterated Purwar.

The SBI had earlier floated Rs 3,400 crore worth of long-term bonds in three tranches and part of it will come for redemption this year.

The bank will ask holders of these bonds to switch over to the new instrument.