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SBI plans to raise $2 bn as corporates line up for refinance

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by January 9, 2018 General

State Bank of India (SBI) will raise $2 billion under its medium-term note (MTN) programme from international markets outside the US for refinancing its corporate clients. The move follows the Reserve Bank of India’s (RBI) nod to overseas branches and subsidiaries of Indian banks to refinance ECBs of high-rated (AAA) corporates as well as Navratna and Maharatna PSUs.

Earlier rupee loans could not be refinanced with ECBs which gave a clear advantage to foreign banks.

A senior SBI official told DNA Money, “This is an enabling approvals. We have not hit the market as yet. The bank is expected to look at the appropriate time to hit the market.”

The central bank has relaxed the regulation provided the outstanding maturity of the original borrowing is not reduced and all-in-cost of fresh ECB is lower than the existing ECB. SBI has an overseas MTN programme of about $10 billion.

However, Indian banks are not looking at aggressive expansions overseas as the growth in the overseas geographies has been muted. In fact, some of the banks including SBI are looking at streamlining its operations.

The last time SBI raised money under MTN was in March 3, 2017, when it mopped up $500 million. This was a three-year loan. It was the second fund raising by the bank under the MTN programme. This was a Regulation (Reg) S bond which was sold through its London branch priced at 0.95% over the Libor. Under the US Securities Act, Reg S bonds are targeted at foreign investors outside the US.

With this, the bank raised $4 billion out of its $10 billion MTN plan, including $400 million in perpetual bonds last year. The bank is also in the process of raising Rs 8,000 crore directly from the market next fiscal through a clutch of instruments, including qualified institutional placement (QIP) and preferential issue, among others, for which it has already secured shareholder approval.

In January 2017, SBI had raised $500 million in a five-year dollar money sale, through its London branch and got listed on the Singapore Exchange. The bank has raised money to fund the repayments, borrowed to fund the expansion of its operations in 37 countries which is run through 198 offices. Before this, the bank had raised overseas debt by issuing $300 million bonds in September 2016. Prior to that, it had raised $1.25 billion in another dollar money sale in February 2014.

BEEFING UP

  • The bank is in the process of raising Rs 8,000 crore directly from the market next fiscal through a clutch of instruments, including qualified institutional placement  
  • In January 2017, SBI had raised $500 million in a five-year dollar money sale, through its London branch and got listed on the Singapore Exchange

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