Indian banks to raise $3bn in FY07

Indian banks are expected to mop up around $3 billion through the hybrid route by the end of the current fiscal due to the increasing investor interest in the sector.

Judging by the recent successes of ICICI Bank and UTI Bank in their capital-raising initiatives for their tier-I structure and with more banks expressing intent to follow suit, this figure could expand to around $7-8 billion in the next two-three years, senior bankers told PTI here.

Raju Shukla, managing director (investment banking-Asia) of Barclays Capital, expects the successful run to continue over at least the next three years. "Going by investor demand and the over-subscription witnessed, a similar demand for other issues can be expected," he said.

"The perception of foreign investors vis-a-vis Indian banks is now very favourable, and this is an important factor when raising capital overseas," H N Sinor, chief executive of Indian Banks' Association (IBA), pointed out.

The Indian banking system's structure of tier-I and tier-II is now well-accepted internationally, banks' ratings are positive, global debt markets stable and huge funds available for play - all key factors combining in favour of banks raising hybrid capital abroad.

"The first top half-a-dozen banks' issues should sail through," Shukla said, while Sinor saw "no immediate reason for fund-flow through this route to dry up."