SBI sets sights on $1.25 billion loan in biggest foreign fundraise of the year

State Bank of India (SBI) is reportedly negotiating a $1.25 billion dollar-denominated loan, a landmark move as it would be the largest overseas borrowing by India’s financial sector this year. A Bloomberg report says the financing is being arranged by CTBC Bank, HSBC Holdings Plc, and Taipei Fubon Bank.

The five-year loan comes with an interest rate margin of 92.5 basis points over the Secured Overnight Financing Rate.

The loan, initiated through SBI’s Gujarat International Finance Tec-City (GIFT City) branch, will be used for general corporate needs, with SBI planning to syndicate the loan among other lenders to distribute the risk. This push places SBI among a wave of Indian institutions leveraging foreign currency debt in 2023 amid stricter domestic financing regulations.

While SBI is eyeing one of the largest deals, other Indian lenders have also sought substantial foreign funds this year. Cholamandalam Investment & Finance Co., a non-banking finance institution, recently aimed for a $300 million syndicated loan. Union Bank of India’s Sydney branch is arranging a three-year A$125 million loan, and Bank of Baroda is set to raise $750 million.

Despite this activity, India’s total dollar-denominated loan volume has seen a 27% drop to $14.2 billion in 2023, attributed to a pullback in large corporate borrowings, according to Bloomberg data.

SBI’s planned fundraising follows its recent $750 million, three-year loan in July, reinforcing its strategy to diversify funding. This loan announcement also aligns with the Reserve Bank of India’s recent reaffirmation of SBI as a Domestic Systemically Important Bank (D-SIB), a designation that requires it to hold additional capital buffers. SBI remains in the top D-SIB category (bucket 4), which mandates an extra 0.80% in Common Equity Tier 1 (CET1) by April 2025.

Business Today has not independently verified the report. SBI has not issued a comment on the matter, and updates will be provided if the bank releases an official statement. State Bank of India closed at Rs 805.95, down by Rs 2.70 (0.33%) as of November 14.