Domestic lenders set record with $8 billion in dollar bond sales

By Harry Suhartono and Dipika Lalwani

 

Indian financial institutions have sold a record amount of dollar bonds so far this year, as lenders rush to capitalize on a central bank facility that lowers hedging costs on overseas borrowings.

 

The offerings reached $8 billion Thursday, breaching the previous record of $7.92 billion hit in 2019, according to data compiled by Bloomberg. At least four issuers, including the State Bank of India, ICICI Bank Ltd. and Axis Bank Ltd., tapped the market in August, marking the busiest-ever month for such borrowings.

 

The issuance has gathered pace since the Reserve Bank of India in early June announced the concessional foreign-exchange swap facility for banks and state-run firms, boosting domestic liquidity and supporting credit growth. The special window is open until Dec. 31, prompting more lenders to accelerate their offerings.  

 

 

The central bank surprised traders on Friday by closing a special window for attracting foreign-currency deposits a month ahead of schedule, leading to a selloff in shorter-tenor India bonds, but there is no change in the deadline for the overseas borrowing facility for now.  

 

About two-thirds of the dollar borrowings by Indian firms this year have come from financial institutions, highlighting lenders are responding to the central bank’s efforts to boost capital inflows, after a tepid market earlier in the year due to high hedging costs. The facility offers a fixed annual rate of 1.5 per cent for an average maturity of at least three years, lower than current market costs.

 

The pipeline is set to grow further. Kotak Mahindra Bank Ltd. and Yes Bank Ltd. have mandated advisers for potential benchmark-sized dollar bond offerings.

 

The surge has spanned both private- and public-sector banks, according to Citigroup Inc. Strong global order books have allowed recent deals to price tighter than initial guidance, underscoring international investor appetite for exposure to Indian financial-sector credit, the US bank said.