MUMBAI, Oct. 15 -- State Bank of India (SBI), the country's largest lender, is set to issue what could be the first domestic bank bond of the current financial year. Two people familiar with the matter told Mint that the bank plans to tap the debt market this week with 10-year tier-II bonds. The bank aims to raise up to Rs.7,500 crore through the offering, which has a base issue of Rs.5,000 crore and a green-shoe option of Rs.2,500 crore. The bonds will carry a five-year call option, one of the persons said. "The bond issue is likely to come this week, with bidding expected on Friday." The proceeds would likely be used to meet regulatory requirements and support business growth, the people said. SBI Capital Markets Ltd is arranging the issue. An emailed query to SBI went unanswered at press time. If successful, the deal would mark the first major domestic bond issuance by a public sector bank this financial year and could signal other lenders to return to a market that has seen few offerings in recent months. "Banks remained on the sidelines of the bond market, choosing not to tap for fresh capital because of comfortable liquidity positions, stable deposit growth, and subdued credit demand from corporates...this further depressed overall issuance volumes, especially in the tier-1 and tier-2 capital bond segments that normally bolster monthly mobilisation figures," Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP said. The bank is expected to offer a coupon rate of 6.90-6.95% for the upcoming tier-II bond sale, the people cited above added. Tier-II bonds are subordinated debt issued by banks to raise capital and meet regulatory requirements. In the event of a bank's liquidation, these bonds are repaid after senior debt holders but before equity holders. They are considered riskier than senior bonds but typically offer higher yields than many other fixed-income investments. "This will be the first domestic bond issue by SBI in the current financial year. They had plans to raise funds in August but they deferred it because of elevated levels, so that's why they are coming now," the first person said. Currently, the yield on the 10-year benchmark is 6.51%. Government bond yields had peaked at 6.64% in August amid uncertainty over US tariffs on India and fading hopes of further rate cuts by the Reserve Bank of India (RBI). SBI's bonds usually carry the lowest coupons among bank-issued debt instruments, reflecting investor perception of the bank's safety, given its size and government ownership....