Banks Step Up Tier II Bond Issuances Amid Capital-Raising Boom

Banks are expected to mobilise around ₹25,000 crore through Tier II bonds this financial year. Nearly ₹10,000 crore has already been raised.

• Rising Demand for Capital:
  The surge comes alongside record corporate fund-raising through IPOs, prompting banks to strengthen their capital buffers to support future credit growth.
• Purpose of Tier II Bonds:
  • Issued to enhance the capital base under Basel III norms
  • Minimum tenure: 5 years
  • Provide additional cushion for lending expansion
  • Enable long-term capital mobilisation without diluting equity
  • Considered a low-cost funding option, according to Venkatakrishnan Srinivasan, Founder & Managing Partner, Rockfort Fincap LLP
• Major Issuances So Far:
  • State Bank of India (SBI): Raised ₹7,500 crore via Basel III-compliant Tier II bonds at a 6.93% coupon for 10-year maturity
  • ICICI Bank: Raised ₹1,000 crore through Tier II bonds in June
• Why This Matters:
  Strengthening Capital Adequacy Ratios (CARs) helps banks remain resilient, meet regulatory requirements, and extend more credit as economic activity expands.