Synopsis: The State Bank of India (SBI) is reportedly pursuing a $1.25 billion loan, poised to become the largest dollar-denominated borrowing by an Indian financial institution in 2024. The five-year loan, coordinated by CTBC Bank, HSBC Holdings Plc, and Taipei Fubon Bank, will support general corporate purposes.
SBI's Ambitious Loan Proposal:
The State Bank of India (SBI) has initiated the process of securing a $1.25 billion loan, potentially marking it as the largest dollar-denominated loan from India’s financial sector this year.
The loan, aimed at general corporate purposes, is being raised through SBI’s branch at the Gujarat International Finance Tec-City (GIFT City).
According to sources cited by Bloomberg, the five-year loan is being coordinated by CTBC Bank, HSBC Holdings Plc, and Taipei Fubon Bank.
It includes an interest margin of 92.5 basis points above the risk-free Secured Overnight Financing Rate (SOFR).
While SBI has not yet commented officially, this development reflects the increasing trend of Indian financial institutions turning to international borrowing in 2024.
A Growing Appetite for Foreign Debt:
SBI is not alone in seeking foreign currency loans.
The country’s non-banking financial companies (NBFCs) and other financial institutions have been actively raising funds from global markets due to tighter domestic regulations.
Cholamandalam Investment & Finance Co. recently secured a $300 million syndicated loan, while Union Bank of India’s Sydney branch is marketing a A$125 million ($81 million) three-year loan.
Similarly, Bank of Baroda is in the process of arranging a $750 million loan.
However, despite these individual transactions, India’s total dollar-denominated loan volume has declined by 27% in 2024, amounting to $14.2 billion.
The drop is primarily attributed to the lack of large-scale corporate borrowing activity.
In conclusion, SBI’s $1.25 billion loan marks a significant milestone in India’s financial borrowing landscape for 2024.
As domestic regulations tighten, Indian institutions are increasingly tapping global markets to meet their funding needs.
However, the decline in overall dollar-denominated borrowing highlights a cautious approach by larger corporates.
While SBI’s move may boost confidence in India’s foreign lending capacity, it also underscores the importance of maintaining fiscal discipline amid global economic uncertainties.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers are encouraged to consult with a qualified financial advisor for guidance tailored to their specific needs.
