Bank of India Tier-2 bonds: ₹2,500 cr at 7.28% (2025)

Fundraise highlights

State-owned Bank of India (BoI) has raised ₹2,500 crore through Basel III-compliant Tier-2 bonds, with the cut-off set at 7.28%, according to a Moneycontrol report and an official bank statement. The bonds have a maturity of 10 years, adding long-tenor resources to the bank’s liability profile. BoI said the issuance is meant to fund business growth by augmenting its capital base rather than financing any specific project. The fundraising comes at a time when banks have increased debt market activity after a slow start to the financial year. The bank also indicated that the proceeds will be used for normal business activities.

Structure of the Tier-2 issuance

BoI launched the issue with a base size of ₹1,000 crore and exercised a ₹1,500 crore greenshoe option to reach the final ₹2,500 crore mobilisation. The bonds carry a coupon rate of 7.28% per annum. They are Basel III-compliant Tier-2 instruments, which count toward a bank’s regulatory capital under Reserve Bank of India (RBI) guidelines. The bank said the objective is to augment overall capital and enhance long-term resources in line with those guidelines.

Call option and maturity terms

The bonds mature in 10 years and include a call option after five years and annually thereafter. This structure gives BoI the option to redeem the bonds midway, subject to approvals and conditions applicable to such instruments. A call feature can matter to investors because it may influence the effective life of the bond depending on the bank’s decision at the call date. The reported cut-off yield of 7.28% reflects the pricing at which the issuance was finalised based on overall demand.

Investor demand and yield discovery

The Moneycontrol report said investor bids were spread across narrow yield points during the bidding process. Bids at 7.27% totalled ₹2,280 crore. At 7.28%, bids aggregated ₹2,655 crore. Demand rose further at higher yields, with bids of ₹3,055 crore at 7.29% and ₹3,562 crore at 7.30%. The highest volume in the reported distribution came at 7.31%, amounting to ₹3,882 crore. Based on overall subscription and demand, the final cut-off settled at 7.28%.

Bidding data snapshot

The bidding pattern indicates that demand increased as yields inched higher, while the final pricing remained anchored at the reported cut-off.

Separately, another report in the provided material stated BoI received 68 bids amounting to ₹4,982 crore, and accepted 29 bids aggregating ₹2,500 crore. The issuance was conducted through the NSE Electronic Bidding Provider Platform, as cited in that report.

Settlement timeline

Pay-in and allotment for the bonds are scheduled for December 12, 2025, according to the Moneycontrol report. This timeline is relevant for investors tracking when funds are due and when securities are expected to be credited. The bank’s statement confirms the completion of the fundraise, while the reported settlement date provides the operational milestone for market participants.

Why Tier-2 capital matters for BoI

BoI said Tier-2 capital is being raised to augment overall capital and enhance long-term resources in line with RBI guidelines. Tier-2 instruments are part of a bank’s loss-absorbing capital framework and are used to support regulatory capital ratios. In practice, such issuances can provide additional buffers while supporting business growth and lending capacity within regulatory requirements. BoI also clarified that the proceeds are not earmarked for any particular project and will be used for normal banking operations.

Wider bank bond fundraising context

The deal fits into a broader trend of banks stepping up fundraising through the debt market in recent months. State Bank of India raised ₹7,500 crore in October via Tier-2 bonds at 6.93%, as cited in the material. ICICI Bank issued ₹3,945 crore in November through 15-year Tier-2 bonds at 7.40%, supplementing an earlier ₹1,000 crore June issuance at 7.45%. The same material also referenced fundraising activity across other issuers, including Hudco, Canara Bank, and Axis Bank, without specifying amounts.

Key facts at a glance

Market relevance and what to watch

For investors, the reported narrow yield bands and the final cut-off at 7.28% provide a reference point for pricing of comparable bank capital instruments. For BoI, the transaction adds to its Tier-2 capital base and strengthens long-term funding resources under the RBI Basel III framework. In the broader market, the comparison with SBI’s 6.93% Tier-2 issuance and ICICI Bank’s longer-tenor Tier-2 pricing highlights how issuer profile and tenor can influence outcomes.

Conclusion

Bank of India’s ₹2,500 crore Tier-2 bond issuance, priced at a 7.28% cut-off with a five-year call option and 10-year maturity, underscores the ongoing use of the debt market to bolster regulatory capital. With pay-in and allotment scheduled for December 12, 2025, attention will remain on subsequent bank issuances and how pricing evolves across maturities and issuers.