HDFC Bank to hit dollar bond market under new subsidised scheme: Sources

India's largest private lender, HDFC Bank, is looking to raise at least $500 million via dollar bonds this week, tapping the central bank's subsidised hedging window for overseas borrowings, three sources directly aware of the matter said on Tuesday. The private bank's issue comes after Reuters ‌reported that state-run ⁠lenders ⁠State Bank of India and Bank of Baroda were also in talks to raise dollars this way.

HDFC Bank's plans include a five-year bond issue, with an initial price guidance of 5-year U.S. Treasury yield plus 120 basis points, the sources said.

"The final cutoff should come below 100 bps over U.S. Treasury yields, as ⁠strong demand ‌is expected in the book-building process," said one of the sources, adding the bank could decide to raise ⁠more than $500 million depending on demand.


The sources requested anonymity, as they are not authorised to speak to the media, while HDFC Bank did not reply to a Reuters query seeking comment.

Earlier this month, the Reserve Bank of India said that external commercial borrowings with an average maturity of at least three years by state-run companies and banks would ‌qualify for a swap facility at a fixed rate of 1.5% per annum, compounded semi-annually.

The facility lowers hedging costs and helps cushion a ⁠fall in the rupee.

Merchant bankers expect inflows of around $15 billion to $20 billion through this route over the next six months.

The proceeds from HDFC Bank's bond issue will be used to meet the funding requirements of the bank's foreign branches and foreign subsidiaries, develop and expand business in the foreign offices and meet the bank's general corporate purposes, the sources said, citing a term sheet.