State-owned Canara Bank Ltd announced on Thursday (September 10) that its board has approved a comprehensive capital-raising plan worth ₹8,500 crore through a combination of Basel III-compliant Additional Tier 1 (AT-1) bonds and Tier 2 bonds. The bank will raise up to ₹4,500 crore through AT-1 bonds and ₹4,000 crore through Tier 2 bonds, as reported by CNBC TV18. This strategic capital infusion comes at a time when the bank continues to witness sustained growth across its key business segments.
The proposed AT-1 bonds will be perpetual debt instruments with a call option after five years, subject to regulatory clearance, according to CNBC TV18. The bonds have been rated 'AA+; Stable' by ICRA Ratings and 'AA+; Stable' by India Ratings. The AT-1 bond issue is scheduled to be offered through the Electronic Bidding Platform (EBP) of the NSE on September 16, between 12:00 p.m. and 1:00 p.m. Market expectations for the coupon rate on the proposed issue are in the 7.85%-7.90% range. The bank is expected to complete the fundraising before the end of September 2026.
According to CNBC TV18, Canara Bank is currently on track to achieve a business size of ₹30 lakh crore, backed by continuous growth in deposits and advances across retail, agriculture, MSME and corporate segments. The bank has demonstrated strong liability mobilisation and customer confidence in the recently announced FCNR(B) swap facility by the Reserve Bank of India, whereby it has been able to mobilise a sum of $5.80 billion. This robust performance positions the bank well for the proposed capital raising initiative.
As reported by CNBC TV18, Canara Bank will become the second lender in this financial year to tap the Basel III-compliant additional Tier I perpetual bond route. This follows State Bank of India's successful ₹4,691 crore perpetual bond issuance in July with a similar five-year call option structure. The perpetual bonds will be Basel III-compliant additional Tier I instruments, ensuring regulatory alignment with international banking standards. The proposed AT-1 issuance will further strengthen the bank's capital position and provide additional headroom to support business growth while maintaining a strong capital base and financial resilience.
According to The Hindu BusinessLine, Canara Bank had previously raised ₹3,500 crore from a similar instrument in late 2025 at a 7.55% coupon rate. The bank currently holds a call option on perpetual bonds worth ₹4,000 crore before the end of this year, indicating an active approach to capital management through perpetual bonds. The bank's previous experience with successful bond issuances demonstrates its ability to access capital markets effectively for strategic growth initiatives.
