State Bank of India to channel $1.5 billion in global book in 4 months

The country’s largest lender, State Bank of India (SBI), expects to deploy $1.5 billion in funding that it has tied up over the next four months of the ongoing financial year (2024-25) in international operations. It has firmed up funds — $500 million through bonds (notes) and another tranche of $1 billion through syndicated loans.

 

“Internationally, the book has been growing at a good pace. Customer credit almost touched $66 billion in June 2024 and increased to $70 billion as of September. So, in one quarter, we saw a growth of $4 billion. We see a healthy pipeline for the remainder of the year,” Jayati Bansal, deputy managing director (international banking group), SBI, told Business Standard.

 

 

In rupee terms, SBI’s gross advances in its international book grew by 11.56 per cent year-on-year (Y-o-Y) to Rs 5.88 trillion. External commercial borrowings (ECBs), local credit, and trade finance businesses are major drivers of customer credit.

 

The growth in customer credit is primarily contributed by the New York, Gujarat International Finance Tec-City, Hong Kong, Dubai International Financial Centre, and London branches. It has a pipeline of proposals worth $3–4 billion for disbursement in international business.

 

Indian corporates, including non-banking financial companies, filed proposals in September 2024 with the Reserve Bank of India (RBI) to raise $4.84 billion through ECBs. Of this, the intent through the automatic route amounted to $3.77 billion, and the approval route was $1.06 billion, according to RBI data.

 

Bansal said that in the international book, the bank has to be mindful of the macro factors that play out. It will be cautious about the kind of risk it is taking and the customer credit it is onboarding.

 

Soft rates help to reduce fund costs

 

Last week, SBI concluded a fundraise of $500 million under medium-term note (MTN). It was priced at a five-year US Treasury yield plus 82 basis points (bps). This coupon was 5.12 per cent.

 

Bansal said, “This is one of the tightest spreads achieved by an Indian bank for a comparable tenor (five years). Our initial price guidance went out at treasury plus 115 bps. Finally, because of the bank’s strong credit standing, we were able to tighten the pricing by 33 bps. SBI’s bonds issued in January this year were priced at treasury plus 117 bps,” she added.

 

Between January 2024 and now, there has been a sizeable change in the market. The softening of rates has commenced, and the US Federal Reserve has cut the policy rate twice.

 

The bank has also tied up $1 billion worth of funds through a five-year syndicated loan arranged by HSBC. The pricing was in line with the bond.

 

Given the soft interest rate trend, it expects to get better pricing. “The macro developments also play a part in at what price issuers can raise funds from the market. Indian issuers should be able to get more competitive pricing on fundraising in the future,” she added.

 

GROWTH TEMPO IN GLOBAL BOOK

 

·         Near-term visibility for $3–4 billion loan proposals

·         Customer credit book at $70 billion as of September

·         External commercial borrowings, trade finance, and local credit are major drivers

·         New York, GIFT City, and London among key centres