State Bank of India to Raise Up to $3 Billion Through Forex Debt

Mumbai: The State Bank of India (SBI), the nation’s largest lender, has announced its plans to raise up to $3 billion in foreign currency debt within the current fiscal year. This move aims to support its projected loan growth, which is expected to be around 16%. The fundraising initiative, approved during a recent board meeting, will see the funds raised in one or more tranches through either a public offer or private placement of senior unsecured notes.

The raised capital will be denominated in US dollars or another major foreign currency, reflecting SBI’s strategy to leverage international financial markets. “The executive committee of the central board, at its meeting today, has approved a long-term fund raising in single or multiple tranches of up to $3 billion via a public offer and/or private placement of senior unsecured notes in US dollars or any other major foreign currency during FY25,” SBI disclosed in a statement to stock exchanges.

This strategic financial maneuver comes as banks across the sector are bolstering their capital reserves to meet surging credit demand. According to the latest data from the Reserve Bank of India (RBI), credit demand saw a significant rise of over 17% in May. This trend has prompted several public sector banks, including Canara Bank, Punjab and Sind Bank, and Punjab National Bank, to explore similar fundraising avenues through debt issuance.

SBI’s foray into the overseas bond market is a part of its routine strategy to secure resources for its expanding loan book. The bank has a history of leveraging international bonds to meet its funding needs. Earlier this year, in January, SBI successfully raised $600 million through five-year US dollar-denominated bonds at a coupon rate of 5.1%, issued from its London branch. This was shortly followed by a $250 million green bond issuance in December 2023, underscoring the bank’s commitment to diversifying its funding sources while also supporting sustainable financing initiatives.

The planned $3 billion fundraising is set against a backdrop of robust loan growth and increased lending activity. SBI controls a substantial portion of the system-wide assets and liabilities, approximately one-fifth, highlighting its pivotal role in the Indian banking sector. By accessing international markets, SBI aims to maintain its competitive edge and ensure adequate capital availability to fuel its growth trajectory.

The proceeds from the bond issuance are expected to enhance SBI’s capacity to extend credit, particularly in a climate where demand for loans is escalating. The bank’s proactive approach in securing foreign currency funds also reflects its readiness to navigate the complexities of global financial markets and capitalize on favorable conditions to optimize its capital structure.

Moreover, SBI’s continuous engagement with the overseas bond market not only diversifies its funding base but also strengthens its global financial standing. The successful bond issues earlier this year serve as a testament to investor confidence in SBI’s financial health and strategic direction.

In summary, the State Bank of India’s decision to raise up to $3 billion through foreign currency debt marks a significant step in its ongoing efforts to support loan growth and meet rising credit demand. This initiative, coupled with the bank’s historical success in international bond markets, underscores its strategic financial management and commitment to sustaining its leading position in the Indian banking sector.