Three Indian Development Financiers Plan $1.5 Billion Overseas Loans Under RBI Scheme

NABARD, SIDBI and NaBFID are planning to raise at least $1.5 billion through foreign-currency bank loans under the Reserve Bank of India‘s discounted overseas borrowing facility, according to sources familiar with the matter. Each institution is expected to seek at least $500 million, with NaBFID the furthest along after beginning discussions with lenders.

The institutions are opting for loans instead of issuing dollar bonds because none of them has previously sold dollar debt and the loan process is considered simpler and faster. NaBFID managing director Rajkiran Rai told Reuters that the institution expects to raise up to $2 billion through external commercial borrowings during the current financial year and is currently exploring a $500 million overseas loan. He said the RBI facility could reduce borrowing costs, with the effective cost of the loan expected to be around 6.5%-7.0%.

The RBI earlier this month introduced a subsidised hedging window for banks and state-run companies raising funds overseas, aiming to lower currency-risk management costs, attract dollar inflows and support the rupee. Since the announcement, HDFC Bank, Axis Bank and Power Finance Corporation have collectively raised about $1.85 billion through dollar bonds, while Bank of Baroda and State Bank of India are preparing similar issuances.