HDFC raises $750-m ECB, first under RBI’s special swap plan

Mumbai: HDFC Bank was the first off the blocks to take advantage of the 1.5% fixed rate swap provided by the Reserve Bank of India (RBI) to raise external commercial borrowings (ECBs) as the lender raised $750 million selling 5-year bonds to overseas investors through the GIFT City IFSC Banking Unit. The bond was the bank’s first overseas issue since February 2024.

The bond was priced at 90 basis points above the 5-year US treasury, the tightest spread over the US benchmark for any private sector bank in India, bankers who were part of the issue said. The final coupon on the bond came at 5.067%, the bank said in a stock exchange filing.

“The bank collected an order book of $2.1 billion with about 90 investors bidding for the bond. Investors from Asia dominated, cornering 68% of the issue followed by Europe, Middle East and Africa which had 32%. Large global asset managers made up 54% of the investors with global banks and financial institutions cornering 28% of the share,” said a banker familiar with the details of the issue.

In a bid to attract overseas dollars, the RBI announced a special swap arrangement earlier this month. The swap is open for both banks as well as public sector enterprises. Under the arrangement, a bank can sell dollars to the RBI and simultaneously agree to buy back the dollars at the end of the tenure of the loan at a fixed rate of 1.5% per annum compounded semi-annually, removing the need for them to hedge their future dollar liabilities which cost up to 4% when the swap was announced.Bankers said that other lenders will follow the largest private sector bank as they take advantage of the special RBI window. “It is safe to say that all large public and private sector banks are evaluating the opportunity to raise these funds as we could see some bond and loan raise from local banks starting this month,” said another banker who was part of the HDFC issue.

The central board of State Bank of India (SBI) will meet on June 18 to seek approval to raise funds in the current fiscal through public offer or private placement by issuance of debt instruments (including capital instruments) to overseas or Indian investors in rupee or any foreign currency, the bank said in a stock exchange notice, earlier this week.Besides banks, public sector units such as Power Finance Corp (PFC), Rural Electrification Corp (REC) and National Bank for Financing Infrastructure and Development (NaBFID) are also likely to frontload their external borrowings to benefit from the central bank facility with inflows likely to be close to $75 billion, according to Japan’s MUFG.