Foreign Banks Financing Rib Subscribers

Several foreign banks operating in the Middle East, including Abu Dhabi Commercial Bank, Citibank and Mashreq Bank, are extending credit up to 90 per cent of the customers' requirement in the Gulf region to buy the Resurgent India Bonds (RIB) launched yesterday.

The foreign currency-denominated bonds have received an overwhelming response owing to the unprecedented high rates offered, SBI officials said. The bonds, denominated in US dollars, pound sterling and deutschemark, carry rates of 7.75 per cent, 8 per cent and 6.25 per cent per annum, respectively, payable half yearly in the three currencies.

The foreign banks will be able to earn commission as well as interest on the new business.

 

SBI officials felt leveraging was only to be expected but maintained there would not be any switch of funds from the FCNR(B) accounts of banks to investments in the Resurgent India Bonds.

"FCNR(B) deposits consist largely of small deposits. But we are expecting comparatively larger subscriptions. The smaller deposits will continue to be on both sides. The road shows in Dubai and Abu Dhabi _ the Gulf is the main area from which we are expecting this amount _ and the experience there is, that it will largely be an inflow of new money," officials said.

Stating that leveraging was to be expected the officials said, "We have learnt that some banks have made arrangements for lending to subscribers of these bonds. Both the banks and the investors find it a good proposition."

The RIB investor has the option of receiving the interest half yearly or on a cumulative basis on maturity.

The principal and interest are fully repatriable for non-resident holders.

The bonds can be held by NRIs jointly with resident Indians.