SBI Eyes Major Financing at GIFT City
The State Bank of India (SBI) is gearing up for what may become India’s largest bank loan of 2024, aiming to raise $1.25 billion. The loan, set to be secured through SBI’s branch at the Gujarat International Finance Tec-City (GIFT City), is intended for general corporate purposes. State Bank of India has yet to provide an official comment on the initiative, which has drawn industry-wide attention. The move reflects a strategic approach by India’s largest public sector bank, as the loan is expected to enhance SBI’s liquidity and expand its financial portfolio.
The loan syndication is coordinated by major financial players CTBC Bank, HSBC Holdings Plc, and Taipei Fubon Bank. The five-year financing package offers an interest margin of 92.5 basis points above the risk-free Secured Overnight Financing Rate (SOFR), underscoring a competitive structure designed to attract foreign lenders. State Bank of India’s substantial fundraising efforts reflect the growing trend among Indian financial institutions seeking foreign currency debt amidst challenging domestic regulations.
Foreign Currency Debt Rises Among Indian Banks
State Bank of India joins a notable cohort of Indian borrowers, including non-banking financial companies (NBFCs), which are increasingly turning to international financing this year. As domestic regulations tighten, NBFCs — often referred to as “shadow banks” — have been particularly proactive in pursuing foreign loans to support their operational needs and maintain growth.
One such example is Cholamandalam Investment & Finance Co., a prominent Indian NBFC that recently raised $300 million through a syndicated term loan, showcasing the growing momentum in the foreign debt market. Union Bank of India’s Sydney branch also joined the trend by promoting a three-year loan valued at A$125 million ($81 million) in the Australian market. Additionally, Bank of Baroda is currently in talks to secure a $750 million loan, indicating a broader move by Indian financial entities to diversify their funding sources and mitigate local regulatory constraints.
Decline in Dollar-Denominated Loans Despite Rising Interest
Despite this surge in international borrowing by Indian financial institutions, Bloomberg data reveals a 27% drop in India’s total dollar-denominated loan volume in 2024, totaling $14.2 billion. Analysts attribute this decrease to a significant reduction in large corporate loans, which has offset the flurry of borrowing activities by banks and NBFCs.
The reduced volume in dollar-denominated loans may signal changing dynamics in the Indian financial landscape, where smaller financial players are now driving the borrowing market while large corporates hold back on foreign debt. This trend underscores the adaptability of Indian banks and NBFCs in exploring global markets to secure competitive financing solutions amidst a stricter regulatory environment back home. As Indian banks continue to broaden their foreign debt footprint, this shift may shape new pathways for financial growth and resilience in India’s evolving economic climate.
Did you find this article helpful? Visit more of our blogs! Business Viewpoint Magazine
