ICRA has assigned a rating of AAA (hyb) with stable outlook to State Bank of India (SBI) basel III compliant Rs 20 billion Tier II bonds. This is the first Tier II capital instrument, compliant with the Basel III Capital Regulations, to be issued by SBI, the largest bank in India.

The Basel III Tier II bonds issued by banks are expected to provide their depositors and senior creditors an additional layer of protection. ICRA’s ratings of Tier II instruments are based on its assessment of a bank’s relative standalone financial/fundamental strength, including ICRA's assessment of its asset quality.

Bank's past trends and the outlook for its core profitability. Bank's relative ranking on its expected capitalization levels under stress testing scenarios. Bank's track record and philosophy on maintaining excess capital. Bank’s franchise, relative standing in equity market, its demonstrated ability in attracting fresh equity, and the quality and diversity of its investors.

For banks scoring well on these parameters, the probability of capital erosion would be much less, and therefore, the ratings on Basel III Tier II could be closer to those of the conventional instruments. However, banks scoring relatively low on these parameters would have a relatively higher probability of capital erosion, and therefore, the ratings on Basel III Tier II would be notched down accordingly.

Shares of the company gained Rs 25.5, or 1.58%, to trade at Rs 1,634.35. The total volume of shares traded was 179,873 at the BSE (3.01 p.m., Monday).