Federal Bank to bring in $100 mn from foreign swap

The swaps shall be available at a rate of a 100 bps below the market rate, RBI had said

Federal Bank aims to bring in a little over $100 million from abroad by the end of November, to take advantage of the Reserve Bank of India (RBI)’s new swap rules. The Kerala-based private lender has already raised $70 million and aims to bring in another $30-40 million over the next one month.

“The funds will be primarily used for export credit and foreign currency requirement of our clients. After swapping, the average cost comes to 8.75 per cent,” Shyam Srinivasan, managing director and chief executive of Federal Bank, told reporters on Monday.

The move comes after RBI allowed banks to raise money (above 50 per cent of their tier-I capital) from foreign markets with a minimum maturity of three years and swap the borrowings with it at a subsidised rate for one to three years.

“The swaps shall be available at a concessional rate of a 100 basis points below the market rate for all fresh borrowings with a minimum tenor of one year and a maximum tenor of three years,” the central bank had said in a notification on September 10. The facility will be available till the end of next month.

Other private lenders such as HDFC Bank and YES Bank have also raised money from overseas to make use of this facility. YES Bank was the first lender to take advantage of the swap window, raising $255 million through a dual currency, multi-tenor syndicated loan facility. Federal Bank has also mobilised $6 million-$8 million foreign currency non-resident (bank) or FCNR (B) deposits. “Our focus continues to remain on rupee deposits,” Srinivasan said, adding that the private lender will not be aggressive in mobilising FCNR (B) funds.

The bank raised the FCNR (B) deposits after the central bank had announced a swap window to attract such funds.

“RBI has been receiving requests from banks to consider a special concessional window for swapping FCNR (B) deposits that would be mobilised according to the recent relaxations permitted by RBI. Accordingly, it has been decided to offer such a window to banks to swap fresh FCNR (B) dollar funds, mobilised for a tenure of at least three years, at a fixed rate of 3.5 per cent a year for the tenure of the deposit,” RBI had said via a notification on September 4. Separately, the bank said its second quarter net profit increased by almost five per cent from a year earlier to Rs 225.8 crore.