YES Bank becomes first lender to use new swap rules

YES Bank, the country's youngest private sector lender, has become the first bank to take advantage of the Reserve Bank of India (RBI)'s new swap rules. The bank has raised $255 million via a dual currency, multi-tenor syndicated loan facility.

The move comes barely days 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 borrowing 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.

YES Bank raised the money in dollar and euros, and the new swap norms are likely to help the lender in reducing its incremental cost of funds.

"The recent guidelines on offering swap facility to banks, for their foreign currency borrowings, at 100 basis points below the market rate, will make the landed rupee cost of these funds cheaper than the current rupee deposit rates," a banker familiar with the development said. The bank did not disclose the pricing for this transaction, saying the deal was done at benchmark pricing for other private sector loans from India.

The money was raised in two tranches - $75 million and ^34 million for one year, and $105 million and ^24 million for two years. The bank aims to use the funds for general corporate purposes and trade finance. The transaction is also the first syndicated loan deal out of India this year.

The issue received participation from across four continents - North America, Europe, Asia and Australia. More than 50 per cent of the commitments were in the two-year bucket.

"This significant commitment from global banks reinforces our unique financial and business model, and further reposes faith and trust in YES Bank management team, despite the challenging global and Indian micro environment," Rana Kapoor, managing director and chief executive officer of YES Bank, said.

The issue size was also fairly large, considering large banks' syndicate loans do not usually exceed $300 million.

The transaction was done through 10 banks. ANZ Banking Group, Citigroup Global Markets Asia, Commerzbank Aktiengesellschaft, Doha Bank QSC, Emirates NBD Bank PJSC, HSBC, Landesbank Baden-Wurttemberg, Standard Chartered Bank, State Bank of India and Wells Fargo Bank were the mandated lead arrangers and book-runners on the transaction.