SBI plans to raise up to $1.5b via over­seas bonds

The Pak Banker - - FRONT PAGE - NEW DELHI -APP

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".

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