State Bank of India is seeking a $1.25 Billion Loan: India’s Largest Bank Loan of 2024

November 18, 2024

State Bank of India (SBI) plans to borrow up to $1.25 billion, making it the biggest dollar loan from India’s financial sector in 2024. The loan is being arranged by CTBC Bank, HSBC Holdings Plc, and Taipei Fubon Bank. It will have a five-year term and an interest margin of 92.5 basis points over the Secured Overnight Financing Rate.

Purpose of the Loan

SBI aims to use the funds for general corporate purposes. The loan is being facilitated through SBI’s branch at the Gujarat International Finance Tec-City. This location serves as India’s newest financial hub.

The loan deal is being syndicated to other financiers. This means that multiple financial institutions may participate in funding the loan. Syndication helps spread risk among lenders.

Recent Trends in Foreign Borrowing

SBI is not alone in raising foreign currency debt. Other local borrowers are also seeking dollar-denominated loans this year. Non-banking finance companies, known as shadow banks, are particularly active in this space.

Examples of Other Borrowers

Cholamandalam Investment & Finance Co. is looking for a $300 million syndicated term facility. Union Bank of India’s Sydney branch is marketing a three-year loan of A$125 million ($81 million). Bank of Baroda is raising $750 million in borrowing.

Decline in Dollar Loan Volume

Despite these activities, India’s dollar loan volume has decreased by 27% this year. The total volume stands at $14.2 billion. This decline is attributed to the lack of large company borrowings.

In July, SBI raised a $750 million, three-year loan. This indicates a trend of ongoing borrowing despite market challenges.

Important Facts for Exams:
CTBC Bank: CTBC Bank is a Taiwanese bank headquartered in Taipei. It is one of the largest private banks in Taiwan. The bank offers various financial services globally.
Gujarat International Finance Tec-City: Gujarat International Finance Tec-City is India’s first International Financial Services Centre. It aims to attract global financial services firms. The city is located in Gandhinagar, Gujarat.
Shadow Banks: Shadow banks are financial intermediaries that operate outside traditional banking regulations. They provide similar services to banks. Their activities can increase systemic risk in the financial system.

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