Sbi To Offer Rib Funds To Core Projects At A Flat Rate

State Bank of India (SBI) yesterday said it will on lend funds collected from Resurgent India Bonds (RIB) at a flat rate to infrastructure projects as the foreign currency-denominated bonds are being issued at a fixed rate.

"Since we are borrowing at a fixed rate, we would be able to lend to infrastructure projects at a fixed rate," said SBI chairman M S Verma. "This is a new product we are positioning ourselves to offer," he added. Earlier, the term-loans extended by banks were linked to their prime lending rate (PLR) and hence the lending rates were subject to fluctuations. The RIBs, denominated in dollars, pound/sterling and mark, will carry an interest rate of 7.75 per cent, eight per cent and 6.25 per cent per annum, respectively, payable half-yearly in the three currencies.

 

The bonds, which are being launched on August 5, may be closed within ten days, indicated Verma, who did not wish to estimate the total amount that could be mobilised. He, however, was confident of garnering $3.5 billion.

He pointed out that there would be no problem in deploying the funds "as there are nearly fifty projects getting to the construction stage". "As a banker what is the point in taking money if you cannot deploy it," he said. He felt that there are other avenues where the funds could be deployed profitably. Verma said the exchange rate risk would be manageable as the rupee would not depreciate more than three-four per cent annually.

The RIBs are eligible for investment by non-resident Indians (NRIs), overseas corporate bodies (OCBs) and banks acting in a fiduciary capacity on behalf of NRIs and OCBs. The investor will have the option of receiving the interest half yearly or on a cumulative basis on maturity. The principal and interest are fully repatriable in respect of non-resident holders.

He said that road shows held overseas by SBI for the RIB have received an overwhelming response from NRIs and OCBs in different parts of the world. The bank had sent a team of senior officials to Europe, the middle east and the far-east to promote the bonds.

The enthusiasm that the bank teams encountered at each place indicates that the RBI offer could set a new record for NRI subscriptions, he added.