Lenders may turn to OFCB route to raise more funds abroad

Mumbai: Several Indian lenders are likely to focus on the overseas foreign currency borrowing (OFCB) window to raise more funds abroad, as the advanced August 31 deadline for individual deposits targeted at the diaspora has left them with insufficient time to close fundraising deals. The December 31 OFCB deadline, to be sure, remains unaltered.

Bankers said that bond issues planned to support foreign currency non-resident - bank (FCNR-B) deposits are practically over as the T + 3 pay-in does not allow banks with enough time to get money in before the deadline.

As a result, many banks have kept their bond issues on hold.


More than half a dozen private as well as public sector banks, namely, RBL Bank, Yes Bank, Federal Bank, Bank of Maharashtra, UCO Bank, Indian Bank, and Bank of India have taken board approvals and started the process to issue bonds abroad in the last couple of months.

Many of these lenders working with a September 30 deadline in mind had to change their plans after the RBI advanced the last date to August 31. "All these banks are now drawing up a new timeline. So, we might see some debut bond issues in September and October," said a debt capital market executive from a foreign bank. "Some of them have already taken short term loans which will be replaced by cheaper funds through the bond issue."

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Federal Bank, for instance, has raised $500 million through a short-term loan of less than a year from HSBC. This money will be replaced by cheaper funds from a bond issue the bank has planned later this year.

By doing this, the bank has made use of the concessional swap window from the RBI for FCNR (B) deposits without rushing with a bond issue immediately.

Federal Bank did not reply to an email seeking comment. HSBC declined comment.

"Some banks would take a short term loan with a plan to issue a longer tenure bond later but that also means that they expose themselves to an asset liability mismatch. Some others may just borrow through the RBI's OFCB window which covers some part of the hedging cost," said a second foreign banker.