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Source: The Hindu BusinessLine
HDFC leads Indian private banks’ push to raise billions overseas
Major private banks are preparing to raise billions of dollars through overseas bonds and loans. HDFC Bank leads this group to help stabilize the rupee and meet capital needs.
Big private banks in India are planning to raise up to $3 billion through dollar bonds or loans. HDFC Bank, the country's largest private lender, is leading this move by aiming to raise $1 billion. This plan comes as banks look to take advantage of special rules from the Reserve Bank of India (RBI) that make borrowing from foreign markets cheaper for Indian institutions.
Apart from HDFC Bank, four other lenders are looking for foreign funds. Federal Bank, Kotak Mahindra Bank, RBL Bank, and Yes Bank are each considering raising between $250 million and $500 million. Many of these banks do not usually borrow from the international dollar market, but the current situation has made it more attractive for them to do so.
The main reason for this rush is the RBI’s effort to protect the Indian Rupee. The Rupee recently hit record lows, and the RBI wants more foreign money to enter India to support the currency. To help with this, the RBI is offering a special 'swap facility' (a way to exchange currencies at a fixed rate). This facility allows banks to hedge their risks (protect against currency price changes) at a lower cost than the usual market rate.
The RBI's special window for this cheaper borrowing is open until December 31. Banks are also looking at Foreign Currency Non-Resident (FCNR) deposits, which are accounts for NRIs to keep money in dollars. HDFC Bank has already collected about $5.42 billion through these deposits by offering interest rates as high as 6.25 per cent. The deadline for these special dollar deposits is September 30.
For Indian bank officers, this means a significant focus on foreign currency management and NRI services in the coming weeks. While HDFC Bank is leading the charge, even public sector giants like State Bank of India (SBI) are pricing their own dollar bonds. This shows that the entire banking sector is working together to bring in more foreign capital.
However, some experts warn that this strategy has risks. Former RBI Governor Duvvuri Subbarao noted that these are 'borrowed dollars' that must be repaid later, making it a costly way to support the Rupee. So far, the impact on the currency has been smaller than similar moves made in 2013. Bankers should watch how much more debt is raised before the December deadline and whether the Rupee stays stable against the US Dollar.