Rib Collections At $1.75bn

The State Bank of India (SBI) is estimated to have collected a sum of $1.5 billion-$1.75 billion through the Resurgent India Bonds (RIB) issue and is expected to take a decision on the closing date of the issue today.

Sources said although the response for the issue has been encouraging, the bank will mop up a sum of over $3 billion if the issue is kept open till the first week of September. Earlier, SBI chairman M S Verma had expressed confidence that the issue would close on August 17, the earliest closing date.

SBI, which aims to raise $2 billion through the RIB had announced August 17 as the earliest closing date and September 4 as the latest closing date. In fact, after beginning with a figure of $2 billion, Verma later stated that SBI would raise $3.5 billion.

 

Sources said though SBI is monitoring the RIB inflows on a day to day basis, the final decision on the closing date would be taken after consulting the finance ministry officials.

However, although SBI is planning to mobilise 25 per cent of the targeted amount from the US, it may not achieve its target as it has not received a green signal from any other state apart of New York for marketing RIBs.

Meanwhile, the collecting banks have tied up with the other banks for mobilising funds for RIB which has resulted into undercutting on commission fees. For instance, ABN Amro has tied up with ICICI Bank whereby the latter will route its collection on RIB through ABN Amro, which is the collecting bank.

SBI is offering 1.5 per cent on procurement of resources and 0.25 per cent to the bank that is collecting the procured sum. If the bank procures and also collects the entire sum, it manages to earn a commission of 1.75 per cent while a broker at the most can manage earn to earn only 1.5 per cent.

This where the undercutting of the commission takes place. Reportedly, the collecting banks have offered some broker banks to route the collected funds through them and earn 1.75 per cent as against 1.50 per cent earned if routed through SBI.