SBI, HDFC Bank seek $1.7 billion overseas to boost dollar resources

Synopsis

State Bank of India and HDFC Bank are raising significant dollar funds. These large Indian banks are borrowing from foreign institutions to boost reserves. The banks aim to leverage the Reserve Bank of India's special dollar attraction facility. This move allows them to attract overseas client deposits without hedging costs. Both institutions are actively participating in the international dollar funding market.

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Mumbai: Two of India's largest banks, State Bank of India (SBI) and HDFC Bank are together raising an aggregate of at least $1.7 billion through loans from foreign banks as they shore up their dollar resources to take advantage of the Reserve Bank of India's (RBI) special facility to attract dollars into the country.

SBI is raising $1 billion through a five-year loan from HSBC and Japanese bank MUFG which will be syndicated to other lenders next month. This is in addition to the $500 million India's largest lender had raised, first through a $300 million three-year senior unsecured floating-rate bond issue in late June and later by tapping an existing outstanding bond issue due in July 2029 to raise another $200 million.

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HDFC Bank is in line to raise at least $700 million through a 3.5-year loan from Standard Chartered and a clutch of Taiwanese banks, including CTBC, at 110 basis points above the benchmark secured overnight funding rate (SOFR), people familiar with the matter said.

"All large Indian banks are in the dollar fund market to raise funds. SBI's fundraise is a little advance and will soon be syndicated to a wider section of banks.

HDFC's loan, on the other hand, is a club loan and individual banks will take limits according to their ability which is why it is more fluid. The loan size in HDFC's case could go up to $1 billion as more banks join the deal," said a person familiar with the details.

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The money will most likely be used by both the banks to provide leverage to overseas clients making FCNR (B) deposits with the bank. RBI is absorbing the entire currency hedging cost for banks on fresh three- to five-year FCNR (B) deposits, allowing banks to raise fresh funds without worrying about the hedging costs.

SBI, HDFC and MUFG did not reply to an email seeking comment. HSBC and Standard Chartered declined to comment.