State Bank of India (SBI) become one of the first major Indian lenders to raise funds through a recently introduced concessional External Commercial Borrowing (ECB) swap facility of the Reserve Bank of India (RBI) by issuing a $300 million three-year floating rate bonds on the international debt markets.

Key Highlights

• SBI has raised $300 million from overseas bonds with the RBI's concessional ECB swap window for cheaper funding.
• Three-year floating-rate notes have a SOFR link, enhancing SBI's international funding and foreign currency resources.

The fundraising comes after the Reserve Bank of India on June 5 eased the cost of borrowing from overseas, to make it cheaper for businesses and foreign capital to come in. Eligible borrowers can hedge external financing, under the scheme, at a concessional foreign exchange swap facility at a fixed rate of 1.5% per annum, which will also mean that the hedging cost will be significantly reduced.

Three-Year Floating-Rate Notes Issued

The senior unsecured floating-rate notes were issued by SBI's London branch. The bonds are set to mature in three years and have a 100 basis point spread over the Secured Overnight Financing Rate (SOFR) with interest payable quarterly. The notes will be released on July 6.

The overseas fundraising forms part of SBI's broader capital-raising strategy after its board approved plans to mobilise funds through international bond issuances during FY27.

Also Read: RBI Announces $5 Bn Forex Swap to Ease Rupee and Liquidity Pressure

RBI Measures Make Overseas Borrowing Cheaper

To boost foreign currency inflows and foreign funds to India at comparatively lower interest rates, the RBI came up with the idea of concessional ECB swap window for banks and eligible PSUs. The facility is for eligible borrowers for hedging their foreign currency loans at a fixed rate with comparatively lower cost of hedging in the market.

Market participants believe the move will make it easier for the market players to access the global capital markets, lower interest rates for Indian lenders and help the rupee by increasing foreign inflows. The RBI will also use its swap facility for raising money from abroad, with several banks already looking to do so, such as Axis Bank, Bank of Baroda and Power Finance Corporation.

Strong Global Investor Interest

The bond issue highlights investor trust in SBI's credit profile and the Indian banking system. In spite of the uncertainty in the global interest rate market, the pricing is 100 basis points above SOFR and demand from international investors is strong.

The deal also bolsters SBI's foreign currency liquidity and future capacity to serve international lending requirements, as well as overseas business expansion, and will also help it capitalize on the lower funding rates offered by the RBI policy support measures.