State Bank of India Contemplates New Basel III Bond Issuance for 2026

On July 10, 2025, the State Bank of India (SBI), the nation's largest lender by assets, announced plans to consider raising funds through the issuance of Basel III-compliant capital bonds denominated in Indian rupees for the financial year 2026. The bank's board is scheduled to review this proposal on July 16.

This potential bond issuance is part of SBI's ongoing strategy to strengthen its capital base in line with international regulatory standards, thereby enhancing its capacity to support economic growth and maintain financial stability.

Background on Basel III and Capital Bonds

Basel III is a global regulatory framework developed by the Basel Committee on Banking Supervision in response to the 2008 financial crisis. It aims to improve the banking sector's ability to absorb shocks arising from financial and economic stress, enhance risk management, and strengthen banks' transparency and disclosures. Basel III-compliant bonds, such as Tier II bonds, are instruments that banks issue to bolster their capital base, ensuring they meet the required capital adequacy ratios.

SBI's Previous Fundraising Activities

SBI has a history of utilizing bond issuances to strengthen its capital base and support lending activities:

• September 2024: SBI raised ₹7,500 crore through Basel III-compliant Tier II bonds with a 15-year maturity and a call option after 10 years, at a coupon rate of 7.33%. The issuance attracted bids more than three times the base issue size, indicating strong investor confidence.

• November 2024: The bank raised ₹10,000 crore via 15-year infrastructure bonds at a coupon rate of 7.23%. The issue was oversubscribed by over two times, reflecting robust demand from investors.

• March 2025: SBI postponed plans to raise $1.7 billion through bond sales due to elevated yields, despite a policy rate cut and liquidity boost from the central bank. The bank assessed its asset-liability position and decided not to proceed with the bond issues at that time.

• June 2025: Reports indicated that SBI was likely to initiate a debt fundraising cycle by August through a Basel III-compliant Tier II bond issue, aiming to raise about ₹5,000 crore with a 10-year or 15-year maturity. The bank was considering a 15-year structure with a call option at the end of 10 years, similar to its previous issue.

Implications of the Proposed Bond Issuance

The proposed issuance of Basel III-compliant capital bonds is significant for several reasons:

• Strengthening Capital Adequacy: By issuing these bonds, SBI aims to enhance its capital base, ensuring compliance with regulatory requirements and supporting future growth.

• Market Confidence: Successful bond issuances can bolster investor confidence in SBI's financial health and strategic direction.

• Economic Impact: As the largest lender in India, SBI's actions can influence the broader banking sector and economy, potentially affecting lending rates and availability of credit.

Conclusion

SBI's consideration of a new bond issuance reflects its proactive approach to capital management and adherence to international standards, positioning the bank to effectively support India's economic development.