HDFC Bank First To Tap RBI Swap Window With $750 Million Overseas Bond

HDFC Bank has become the first lender in India to put the Reserve Bank of India's new subsidised hedging window to use, raising $750 million through a five-year bond sold out of its GIFT City International Financial Services Centre Banking Unit.

The bond priced at 90 basis points over five-year US Treasuries, with a final coupon of 5.067%. It is the largest offshore bond by an Indian lender since the State Bank of India raised the same amount in May 2023, and HDFC Bank's own first overseas issuance since February 2024.

The Numbers Behind The Deal

• Order book: $2.1 billion from approximately 90 investors.

• Asian investors: 68% of the issue.

• Europe, Middle East and Africa investors: 32% of the issue

• Global asset managers: 54% of investors

• Global banks and financial institutions: 28%

• Pricing: Launched at 120 basis points over Treasuries, tightened to 90 basis points on demand

• All-in landed cost of funds including hedging discount: Around 7%

How The RBI Swap Works

The Reserve Bank of India announced the special swap arrangement earlier this month as part of its broader push to attract dollar inflows and support the rupee. Under the facility, a bank sells dollars to the Reserve Bank of India and simultaneously agrees to buy them back at the end of the loan tenure at a fixed rate of 1.5% per annum compounded semi-annually.

This removes the need for banks to hedge their dollar liabilities in the open market, where hedging costs were running at up to 4% when the swap was announced.

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What Comes Next

Proceeds from the bond will support HDFC Bank's overseas branches and subsidiaries, fund growth in offshore businesses and meet general corporate purposes. Bankers said all large public and private sector banks are evaluating similar fundraises, with bond and loan issuances from domestic banks expected to begin this month itself.

HDFC Bank's successful execution is expected to open the door for a wave of similar transactions. State Bank of India's board meets on 18 June to approve overseas fundraising plans, and Bank of Baroda is also lining up a dollar bond. Beyond banks, public sector entities including Power Finance Corporation, Rural Electrification Corporation and National Bank for Financing Infrastructure and Development are all expected to tap the facility.

Sources:

The Economic Times

Reuters