IDBI Bank plans to sell bonds in Swiss francs

After Union Bank of India and State Bank of India, another government-run lender, IDBI Bank, is planning to raise funds in Swiss francs through bond issuances worth CHF1 million. The bank has appointed BNP Paribas, Credit Suisse and UBS AG to manage the issuance.

Attractive interest rates, an appreciating currency and a potential appetite for Indian issuances are driving Indian banks to the Swiss market for funds. “The Swiss market is prepared for Indian issuances, now that SBI and Union Bank have already raised funds. We are in a position to borrow from that market but the rates should be suitable,” said IDBI Bank Chief Financial Officer, P Sitaram.

He said the funds raised would be directed towards lending to existing corporate clients who required for funds in foreign currency. He said there was a probability that it may happen in this quarter.

Union Bank of India had sold CHF160 million worth of bonds maturing in four and a half years in January, while State Bank of India raised CHF325 million in February 2011. The Export-Import Bank of India also raised CHF175 million though Swiss franc denominated bonds.

“Indian banks are eyeing a liquidity pool that is available only if one issues Swiss franc-denominated bonds. Interest rates have continued to be low for extended period of time and the currency has appreciated a lot,” said the treasury head of a private sector bank. According to a Thomson Reuters research report, the financial sector accounted for 87 per cent of debt issuances in the fourth quarter of financial year 2010-11.