Sbi Plans Securitisation Of Receivables From Nris

State Bank of India (SBI) is planning to securitise a part of its future receivables in non-resident Indian investment portfolios for the next five to seven years. The proposed deal, which would be the first of its kind by any Indian bank, is expected to net the bank $250-$300 million.

The move fits in with SBI's strategy of raising low-cost funds through private placement of capital. Besides, it will help the bank improve its cross-border rating.

Two multinational banks _ ABN Amro and Nations Bank _ have already made presentations on the securitisation float to SBI Caps, which has been entrusted with the task of finalising the size of the float and the banker for the issue. A decision is expected soon.

 

Banking sources say SBI has plans for full securitisation of its NRI portfolio and future receivables in this portfolio for a fixed time period, but has decided to go in for only part-securitisation as it wants to `test the waters'. The float would provide the bank a ready reference rate, apart from helping it to gauge the market appetite for such floats.

Banking circles expect the SBI securitisation float to get a `fine' rating, but pointed out that it would ultimately depend on the basket of foreign currencies it offers. They added that if the bank decides to offer its North American currency basket for securitisation, it could even get a higher rating than India's sovereign rating. This is because the rating on such floats depend on the rating of the country from where the receivables are expected.

A recent securitisation float by Pakistan Telecom Corporation of future receivables on overseas calls got a higher rating than the country's sovereign rating as the receivables were to come in from US and the European telecom multinationals such as British Telecom, MCI, AT&T, Deutsche Telecom and Spring Communication. SBI, however, is yet to take a decision on whether to offer a mixed basket of its NRI investments and receivables or the investments and receivables from a particular region.

Securitisation of future receivables implies that the arranging bank will make an estimate of total forex remittances expected during the period fixed for securitisation and make the upfront payment of this amount to the bank at a discount. The discount will depend on the rating of the float.

The arranger bank will then issue small denominated bonds for the amount it has advanced, which will be sold to overseas bulk investors, mainly US and European insurance companies.

Future remittances in the SBI account will continue to be remitted to the bank account, but the bank will have to float a special purpose vehicle (SPV) for transferring these receivables for making the repayment to the arranger bank.

According to banking sources, the securitisation plan would enable SBI to mop up forex funds at highly competitive rates, unlike the Resurgent India Bonds which are expected to be a big burden for the bank. For instance, the dollar receivables under the RIBs would cost the bank about 350 to 400 basis points above Libor, including the commission to the collecting banks. Besides, the bank will have to shoulder the risk of any currency exchange fluctuations.