SBI And HDFC Bank Tap Overseas Markets For $1.7 Billion To Back RBI Dollar Drive

Two of India's biggest banks are simultaneously in the overseas loan market, raising dollars to feed one of the fastest foreign currency deposit drives in Indian banking history.

State Bank of India and HDFC Bank are together pulling in a minimum of $1.7 billion through foreign bank loans, building dollar firepower to support the Reserve Bank of India's (RBI) concessional swap facility that has already attracted $32 billion in roughly 45 days.

SBI and HDFC Bank shares both traded in the green in the early trade. The SBI share price was ₹1018, up 0.47%, and HDFC Bank shares traded at ₹745, up 1.4%.

Two Deals At A Glance

SBI:

• Amount: $1 billion five-year loan.

• Arrangers: HSBC and MUFG.

• Structure: Will be syndicated to a wider group of banks next month.

• Additional fundraising already done: $300 million three-year bond in late June plus $200 million tapped through an existing bond due July 2029.

HDFC Bank:

• Amount: At least $700 million, potentially up to $1 billion as more banks join.

• Tenor: 3.5 years.

• Structure: Club loan with Standard Chartered and Taiwanese banks including, CTBC.

• Pricing: 110 basis points above the secured overnight funding rate.

Why Both Banks Are Doing This Now

The money will be used to provide leverage to overseas clients making Foreign Currency Non-Resident Bank (FCNR-B) deposits. The RBI is covering the entire currency hedging cost on fresh three to five-year FCNR-B deposits, removing the biggest cost barrier that previously made such fundraising unattractive.

Reportedly, all large Indian banks are now active in the dollar fund market simultaneously, something that reflects both the scale of the RBI's incentive and the urgency with which banks are responding to it.

The Broader Picture

The concessional swap window opened on 05 June has already surpassed the $26 billion raised across the entire 2013 FCNR-B deposit campaign, making it the fastest such mobilisation in Indian banking history.

SBI, HDFC Bank and MUFG did not respond to requests for comment. HSBC and Standard Chartered declined to comment.

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