HDFC Bank raises Rs3,000 crore via AT1 bonds at 7.84%

7 Sept 2022 , 12:28 PM

HDFC Bank, India's largest private sector lender, on Tuesday, sold extra tier-1 (AT-1) bonds worth Rs3,000 crore at a cut-off rate of 7.84%. This rate is lower than the 7.88% cut-off established for Bank of Baroda's AT-1 bond sale of Rs2,474 crore on August 30.

As public sector banks are regarded as having sovereign support, debt offered by them are typically at lower rates than those of their private sector peers.

The bond offering marks the first time in the current fiscal year that a private bank has tapped the debt capital markets by issuing AT-1 bonds. It is also the first time HDFC Bank has issued AT-1 bonds since 2017.

News reports suggest that Canara Bank and Axis Bank are likely to tap the AT1 bond route to raise funds in the near future. The former could raise anywhere between Rs1,500-2,000 crore.

Experts believe easing yields in the sovereign bond market is helping banks raise funds at attractive rates.

All eyes will now be on State Bank of India (SBI), which will sell AT-1 bonds worth Rs7,000 crore today. Experts believe the cut-off for SBI’s AT-1 bonds could be ~7.75%.

As per the latest Financial Stability Report issued by the Reserve Bank of India (RBI), Indian banking system’s capital-to-risk weighted assets ratio (CRAR) stood at 16.7% in March 2022. In order to comply with RBI’s mandate of maintaining CRAR at a minimum of 9%, banks need to be well-funded.

For feedback and suggestions, write to us at [e-mail]