SBI plans to raise up to $1.5b via overseas bonds
According to SBI's annual report for FY19, it sanctioned foreign currency loans worth $12.91 billion to Indian companies and $10.36 billion to overseas entities.
State Bank of India plans to raise long-term funds - up to $1.5 billion - through bonds from international markets in FY21. The executive committee of the central board will meet on June 11 to examine the status and decide on fundraising plans. SBI may raise money through a public offer and/or private placement of senior unsecured notes in dollars or any other convertible currency, during FY21, it said.
Bankers associated with international fundraising said that lenders, including SBI, raise money from global markets on a regular basis. The proceeds are used for lending and repayment of financial instruments maturing that year. Besides market borrowings, it also uses bilateral arrangements and taps multilateral agencies to raise funds.
Last month, state-owned REC - which finances the power sector - had raised $500 million through issuance of overseas bonds. This was the first ever overseas bond issue by an Indian company during the Covid-19 crisis. Notes (bonds) will mature on May 19, 2023, and all principal and interest payments will be made in dollars.
In March, SBI had raised $100 million via Floating Rate Notes (green bonds) at a coupon of 3-month London Inter-bank offered rate (LIBOR), plus 80 bps. The bonds were issued through SBI's London branch, to be listed on Singapore's SGX. SBI has already two Climate Bond Initiative Certified Green Bond issuances, aggregating $700 million.
SBI's foreign office loan book stood at over $40 billion at the end of December 2019, while deposits were in excess of $15 billion, according to the Q3FY20 results presentation.
According to SBI's annual report for FY19, it has sanctioned Foreign Currency loans to the tune of $12.91 billion to Indian corporates, and $10.36 billion loans to overseas entities. In the energy sector, SBI has actively funded oil marketing companies for their working capital requirements after the recent special dispensation, which has significant strategic importance to India - both in terms of augmenting India's energy security amid unstable crude prices, and forex prices.
Further, in the power sector, the lender has been providing external commercial borrowings (ECBs) to power sector firms, and finance companies that on-lend to the sector.
The bank has facilitated corporates in their growth strategies, including green field ventures, by arranging debt in foreign currency by way of ECBs. This support is provided through syndicated deals, in conjunction with other Indian and foreign banks, and via bilateral arrangements.
Virraj Jatania, CEO of Pockit, told me his company no longer has visibility over those safeguarded accounts, which are now being administered by the FCA. However, he said customers shouldn't be concerned about reports of money being moved out of those accounts. "I think there is a lot of hearsay at the moment," he said. "In some instances money does need to move out of those accounts, e.g. for settlement to MasterCard for transactions that took place or to the clearing schemes for faster payments and BACS." He added these were the only reasons funds should be extracted from safeguarded accounts.
More concerning for customers is that funds held in their accounts are not protected by the Financial Services Compensation Scheme, which is designed to reimburse customers when financial institutions fail. In a Q&A released by the Financial Conduct Authority on Friday, the FCA specifically stated that "the Financial Services Compensation Scheme (FSCS) only applies to certain types of activity which does not include issuing electronic money or payment services".