By Saikat Das
Country's largest lender the State Bank of India plans to raise Rs 8,000 crore in the new-year tapping the capital market with business growth in sight.
"The Central Board at its meeting held today accorded approval to raise additional tier 1 (AT 1) capital by way of issuance of Basel III compliant debt instruments in USD and/or INR to the tune of Rs 8,000 crore from domestic/international market including masala bonds," the bank said in a release to stock exchanges.
Masala bonds are rupee denominated debt instruments, sold in overseas market where investors take the exchange rate risk. Basel III is an international norms for bank capital.
State Bank of India (SBI) said it has time limit till March 2018 to raise the funds.
Banks in India have to comply with such global capital norms under Basel III by March 2019, three months later than the internationally agreed time frame by January 2019.
Under the Basel-III requirement, perpetual bonds or additional tier-I (AT1) securities are more of a quasi-equity instrument. If an issuing bank incurs losses in a financial year, it cannot make coupon payment to its bondholders even if it has enough cash.
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