No pressure from government to cut rates: Pratip Chaudhuri

Mumbai, September 7: In an interview with ET Now, Pratip Chaudhuri, chairman, SBI, talks about the rationale behind their decision to cut rates as well as credit growth targets and the expected NPA levels in Q2. Edited excerpts:
ET Now: Take us through the rationale behind your decision to cut deposit rate.
Pratip Chaudhuri: Yes. Our deposit growth has been very robust from April 1 to August 31. The deposits have grown by Rs 75,000 crore and the loan growth, including commercial paper, has been only Rs 30,000 crore. Therefore, we thought we will try to restrict and moderate our deposit growth.
ET Now: Are PSU banks cutting rates under pressure from the government even though SBI has been the first to do so?
Pratip Chaudhuri: We don't cut rates because of pressure from the government. PSU banks decide their rates on their own. But while deciding the rate, one has to look at the market and the relative positioning of the bank. We adjust the rate looking at the demand. For example, in our case, we reduced the car and home loan rates thinking that the reduction would allow growth in the loan book for cars and homes.
ET Now: But many banks have revised their credit growth targets in light of low demand. Is there is a similar thought at SBI as well?
Pratip Chaudhuri: These targets are not our own. The targets are largely determined and shaped by the volumes you see. It is very easy to move the credit growth target up, but where are the deposits? Similarly, if you get more deposits and there is not enough traction in the credit market, then you have to calibrate it down. Therefore, it is always a function of demand and supply. And I do not think the individual target-settings by banks are anyway meaningful.
ET Now: What kind of loan growth are you seeing and sectors will drive this demand?
Pratip Chaudhuri: For our bank, the biggest contributor has been the construction sector, particularly the contracting firms and companies which are doing work for state government agencies. Next are the electrical machinery and the power sector which are selling their produce to the distribution companies. These have been the two biggest sectors.
There was some worry on the iron and steel front because there were problems as far as iron ore mining and availability of iron ore is concerned. The iron ore mining situation is becoming slightly better. Therefore, we expect the steel sector's raw material availability to rise and their finances to improve as well.
ET Now: Tell us about your asset quality, especially in terms of the power, iron and steel sectors. Which sectors are likely to be the biggest contributors to your NPA situation?
Pratip Chaudhuri: The levels can be known with some degree of accuracy only by the 20th or 25th of the month following the quarter, but we are working hard to control these levels.
ET Now: What kind of NPA levels are you expecting in Q2?
Pratip Chaudhuri: Restructuring pipeline is not very different from the delinquent pipeline. Therefore, for companies that are under stress but have real value asset and want to borrow against that, we are considering extending the tenure of the loans or making available more loans.
ET Now: What is the extent of restructuring that you are expecting in the second quarter? Tell us what the pipeline is looking like.
Pratip Chaudhuri: Under the SBI Act, the minimum government holding has to be 51%. Therefore, I do not think it is right for me to comment because the government's holding percentage has to be determined by the government. I can only tell you that the government has left no stone unturned in capitalising the public sector banks. Last year, they pumped in about Rs 15,000 to 20,000 crore of equity to keep the pubic sector banks well capitalised.
Therefore, I do not think anybody should doubt the commitment and ability of the government to keep the banks well capitalised. But at the same time it is important that the banks generate sufficiently large internal surpluses.

SBI signs MoU with Japan Bank for International Cooperation to help Japanese SMEs

MUMBAI: The country's largest lender State Bank of India (SBI) today signed an MoU with Japan Bank for International Cooperation (JBIC) to help small companies from the far east nation to do business here.
Regional banks from Japan do not have a presence in India but SMEs from that country operating here or planning to enter the market here need to avail of financial services and "This MOU would assist JSMEs (Japanese small and medium enterprises) to meet their financial requirements from SBI," the SBI statement said.
JBIC has been mandated by the Japanese government to coordinate with regard to the needs of JSMEs.
The MoU was signed by SBI's managing director and group executive (International Banking) Hemant Contractor and managing executive officer of JBIC, Kazuo Yuhara, today.

RBI Dy. Governor's remarks on SBI chairman are in bad taste

The RBI deputy governor's reported remarks on the SBI chairman are in bad taste. The issue here is not whether the SBI chief has a point when he says that cash-reserve requirements on banks are an unfair imposition considering there is no such demand from insurance firms, non-banking financial companies and mutual funds.
The RBI deputy governor would have been well within his rights in disagreeing. Where he has gone overboard is in suggesting that the SBI chairman can work somewhere else if he does not like the RBI's regulatory framework.
A regulator, especially one like the RBI that prides itself on its independence, should have the tolerance to hear its decisions being questioned by stakeholders. Flying off the handle at any dissent is unwarranted.

SBI chief gets taste of RBI's tongue-lashing

Chennai, Aug 27: His predecessor, O P Bhatt, had spent the better part of his five-year tenure in a bitter war of words with the Reserve Bank of India over teaser home loans and sundry other things. State Bank of India Chairman Pratip Chaudhuri obviously didn’t want that to continue — so his first public statement after taking over in April last year focused on why SBI should not get into a state of perpetual conflict with the regulator.
Chaudhuri’s best efforts apparently have not been enough to soothe the RBI’s nerves and to stop it from seeing SBI as a problem child. A week after he suggested the abolition of the cash reserve ratio (CRR) — the proportion of deposits banks need to park with the regulator — RBI Deputy Governor K C Chakrabarty bluntly said on Monday — Chaudhuri “has to find some other place” if he could not work as per the central bank’s regulatory environment.
Chakrabarty was responding to a question from the audience at a conference on systemic risk here. The tongue-lashing took many by surprise, as it was probably the first time that a top RBI official resorted to such a public reprimand for the chairman of the country’s largest bank. Chaudhuri had said keeping the CRR balance with the RBI was costing the banking system Rs 21,000 crore. He had questioned why the CRR was not applied to insurance companies, non-banking financial companies and mutual funds, which were also mobilising public deposits. “CRR doesn't help anybody and it is unfairly put on the banks,” Chaudhuri had said.
While the RBI used to pay interest on CRR funds, that was withdrawn a few years back. Interestingly, SBI has reduced the lending rate on some segments such as retail and small and medium enterprises and said the reduction was due to a cut in the CRR and not due to a policy rate or repo rate cut. The RBI had reduced the repo rate in April by 50 bps to eight per cent.
Meanwhile, to another query as to “which banking tree needed to be protected”, Chakrabarty, drawing a forest fire analogy, said: “Obviously, it is SBI. It is too big a tree. If you fail to protect the SBI tree, it (the fire) may spread to other banks and it will turn out to be a systemic failure.”

Chakrabarty frowns at SBI chief’s views on CRR phase-out

Chennai, Aug. 27: The Reserve Bank of India Deputy Governor, K. C. Chakrabarty, came down heavily on State Bank of India Chairman Pratip Chaudhuri’s views seeking the phase out of the cash reserve ratio (CRR), saying either comply or do business elsewhere.
Responding to a question, on the sidelines of a financial conference on systemic risk organised here on Monday by the Great Lakes Institute of Management, Chakrabarty said banks must work within the framework prescribed by the regulator. “If the SBI Chairman is not able to do the business in this regulatory environment, he has to find out some other place,” he said.
CRR is the percentage of deposits commercial banks keep with the central bank.
Pratip Chaudhuri recently said that CRR does not help anybody. “When CRR is not applicable to insurance companies, non-banking finance companies and mutual funds that also mobilise funds from the public, it is an unfair imposition on banks,” he said to make a point that the CRR adds to the cost of doing business for banks.

Rs 4,000-cr capital infusion on cards: SBI chief

State Bank of India expects Rs 4,000 crore capital infusion from the Union Government this fiscal. The bank will be discussing the matter with the Government this week, said Pratip Chaudhuri, Chairman, SBI.
The bank had earlier this year received close to Rs 8,000 crore from the Government.
“They (the Government) have called us for a meeting which should happen this week, and possibly another Rs 4,000 crore looks to be on the horizon,” he said.
As on June 30, 2012, the bank’s capital adequacy ratio stood at 13.17 per cent.
Non-performing assets
According to Chaudhuri, NPA (non-performing asset) concerns were slightly overplayed. “We should not see ghosts in NPAs,” he said, and added SBI has already taken several measures to bring down its NPAs.
“We are asking companies having non-core assets to sell them and bring the cash. If the company is short of capital, we are asking them to get some private equity or get equity investors, and if the company is asset free and cash poor, we are positioning more loans,” he said.
Recently, SBI appointed 20 credit appraisal experts from leading public sector companies to deal with the technical aspects of its new projects.

There is room for rate reduction: SBI chief

Citing State Bank of India’s example, finance minister P Chidambaram on Saturday prodded other banks to reduce EMIs to boost demand. The daily loan sanctions of the country’s largest lender have increased from 400 cars to 1,200 after EMIs were reduced from Rs 1,766 a lakh a month to Rs 1,699 a lakh a month.
Taking a cue from the minister, SBI chairman Pratip C Chaudhuri told TOI in an interview that there is scope for a further reduction in rates but the bank will be selective. Instead of an across-the-board reduction, SBI will look at sectors where lower EMIs would help push demand. Excerpts:
The FM used SBI’s example to ask other banks to reduce EMIs…
Our decision on consumer durables is the result of what the Reserve Bank has done. We decided that we will share the benefit of whatever excess SLR we are sitting on. Today, if you look at the loan demand from the corporate sector, there are very few projects that are taking off and investment is also low in power, steel or cement. As far as working capital is concerned, people are borrowing below the base rate, and they are borrowing through commercial paper. So, you can’t just push loans in this space. So, we have decided to focus on the retail side and try to push whatever demand is possible.

But why not home loans too?
In case of auto loans, the response is quicker. You sanction a loan today and the person purchases a car in two days. In case of home loans, it takes a while — if I sanction a loan today it will take a few months, if not more, for the entire amount to be disbursed.
Is there further room to reduce rates, even if it’s on the retail side?
Yes, there is room for reduction. We will reduce rates wherever there is the possibility of increasing demand. You look at the retail outlets, there is an immediate increase in demand whenever there is a discount. That’s been our experience too. We cut interest rates for SMEs and now we have done it for cars, where the demand has increased. The only way to improve sentiment is to get people to buy and get people to invest.
The FM also said that he will try to resolve problems related to environmental clearances and land acquisition. What else needs to be done?
Public sector companies and some core sector players are sitting on cash, which needs to be deployed. For instance, the railways can be asked to invest in adding new lines and capacity. Similarly, NTPC and other PSUs need to accelerate capacity addition so that others also join later.
But there are sectors such as roads where companies are unable to take up new projects as they cannot raise fresh equity…
The problem is not due to their ability to raise equity. Agencies such as NHAI, state PWD and state electricity boards are delaying payments. NHAI is invoking guarantees which is making it difficult for companies and creating uncertainty. We have flagged this issue too.
Will lending also get a boost once some of the sectoral issues such as those in power, textiles, and telecom are sorted out?
We do not have much exposure to discoms. But the fact is that they cannot run up losses and delay payments. It will certainly help if the problems are resolved. In other sectors, such as textiles, companies have suffered due to exchange rate-related problems and some of them were over leveraged. In case of telecom, there is no problem with companies that had got licences prior to 2007. They are very strong, enjoy good ratings and have the ability to put more capital. Now that spectrum can be used as a collateral, we will be in a better position to lend.
What about your own problems with NPAs? How much was it due to loan restructurings in 2008?
The worst is over and in the next two quarters, things will look better. Some of it is due to 2008. The outlook then was so buoyant that people lined up huge capital expansion and some of the demand did not materialize.
Is there any progress on capital infusion given that there are suggestions that the government may delay it due to tight fiscal position?
We will get it soon. Last year too, we received capital and the government is keen to demonstrate that it is behind banks and expanding the economy. Our internal generation is quite good and we have taken steps to use capital more efficiently. So, there is no rush at the moment.

Proposed guidelines of RBI on Banks' exposure State Bank of India, ICICI Bank to be affected

New Delhi, August 20: The SBI and ICICI Bank are among those that would be affected if RBI implements its proposed guidelines on banks' exposure to their group entities, global credit rating agency Moody's said today. Last week, the Reserve Bank released draft guidelines to limit banks' exposure to their own group non-financial and financial entities.
As per Moody's, the proposed rules would hurt companies that depend on parent banks for capital and brand support, particularly those with large international operations, or those that operate insurance, securities or asset management businesses that need capital and liquidity support to meet their business needs.
"If the RBI adopts them, the new guidelines would be credit positive for India's banks, but credit negative for group companies that rely on parent banks for capital and brand support," Moody's Investors Service said in a report. It said the "affected banks" include ICICI Bank, State Bank of India, Bank of India, Bank of Baroda and Kotak Mahindra Bank.  "The guidelines would lead these banks to re-examine the financial support they provide to group businesses as anything exceeding the stipulated limits would be detrimental to their standalone capital calculations and thus their business growth," Moody's said.
The rules, it said, would benefit India's banks because they would reduce their concentration and contagion risks from group activities. The guidelines, if implemented, would limit to 5 per cent of paid-up capital and reserves a bank's exposure to a single group non-financial entity, while the maximum exposure to regulated financial services companies would be 10 per cent. However, Moody's said that for the time being, these draft guidelines do not help the banks in any way cope with their immediate asset quality challenges owing to the difficult environment.

Soon, a bank-wide portal that will allow you to shop for best service

Customer is king Online travel portals seed the idea of a similar portal for banks Customers could compare interest rates on deposits/loans across banks at one go Figuring out which bank offers the best deal could become easy Will empower customer
Mumbai, August 20: How convenient it would be to compare at one place interest rates on deposits offered by various banks, their retail loan rates, margin amounts they require, the processing fees they charge, the add-on facilities they offer on deposits, and so on.
Extremely. The Finance Ministry also thinks so, and wants public sector banks, a la travel portals such as cleartrip, makemytrip, yatra and expedia, to explore the feasibility of setting up a bank-wide portal. These online travel portals allow travellers the convenience of comparing the fares quoted by various airlines so that they can buy the cheapest ticket plus the various add-ons such as hotel rooms and airport pick-up.
Wide choice: As things stand now, customers seeking a higher return on their investible surplus, or the cheapest home, car or personal loan, have to either go to the branches of various banks or surf their individual Web sites. No mean task as there are 26 public sector banks, including the five associate banks of State Bank of India. A more discerning customer may widen his search to the 23 private sector banks too.
Time-Saver: But with a bank-wide portal, customers can avoid the tedium of visiting the branches of various banks or surfing their Web sites, saving much time and energy. At the click of a mouse, one can compare interest rates on deposits and loans across banks, said a senior public sector bank official. “The portal could usher in transparency in banks’ dealings with customers,” he explained.
Banks will have to update their details on the portal regularly to reflect the latest position on interest rates, and any change in product features. The portal could also incorporate a feature whereby, if a customer zeroes in on a particular bank to place a deposit with or take a loan from, all he needs to do is share his contact details, so that officers from the nearest branch can contact him to complete the transaction.
Advertising: A banker said that private sector and foreign banks too may join the portal at a later stage, if it attracts enough eyeballs. The project to design, build, own and operate the portal is likely to be given to an information technology company. The company can recover the costs from advertisements placed by banks, insurance companies, mutual funds and broking firms.

Lok Sabha to decide on Banking Act changes

New Delhi, August 19: The almost seven-year wait for amending the Banking Regulation Act is likely to end on Wednesday, when the Lok Sabha will take up amendments in the Banking Regulation Act for consideration and passage. This is one of three financial sector Bills aimed at ushering in a new phase of reforms.
The Lok Sabha’s list of business for August 22 states that Finance Minister P Chidambaram will move the Banking Laws (Amendment) Bill 2011 to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
India Inc is keenly awaiting passage of this Bill as this will push the Reserve Bank of India to issue new banking licences.
Enactment of this Bill will provide new powers to the central bank. It proposes to confer upon the Reserve Bank the power to call for information and returns from the associate enterprises of banking companies, and also to inspect the same, if necessary. The Bill also proposes to empower the Reserve Bank to supersede the board of directors of a banking company for a total period not exceeding 12 months, and appoint an administrator to manage the banking company during the said period. The RBI feels that such power will help it in regulating new as well as existing entities in a better manner.
Another key feature of the Bill is increasing the voting rights. The Bill had originally proposed raising the ceiling on voting rights of shareholders of nationalised banks to 10 per cent from 1 per cent.
For private sector banks, the Bill talked about removing the existing restriction on voting rights limited to 10 per cent of the total voting rights of all the shareholders. However, it is believed that the Government has accepted the Standing Committee’s recommendation of increasing the limit of voting rights to 26 per cent from the existing 10 per cent.
It is expected that higher voting rights will give investors more leeway. The present Bill contains some provisions of the previous Bill. The previous Bill for amendment in Banking Regulation was introduced in the Lok Sabha on May 13, 2005. Even after the Standing Committee’s recommendation, strong opposition from its then allies the Left Parties forced the Government to allow the Bill lapse in 2009 when the term of the 14th Lok Sabha ended.

SBI Cards targets 1 million new customers by 2014-15

SBI Cards, the second largest credit card solutions provider in India after HDFC Bank, is targeting to add one million new
customers by 2014-15, Mr Kadambi Narahari, CEO, said on Thursday.
Between 2007 and 2010, the number of credit card holders in India fell from 27 million to 17 million. Even after this consolidation in the wake of global slowdown, when many credit card companies went out of business, penetration of credit cards in India is still low — as against China and Brazil accounting for 200 million cards each, India accounts for only 18.4 million credit card holders, he told presspersons here.
SBI Cards have a customer base of 2.3 million. HDFC currently issues about 80,000 credit cards per month while SBI Cards issues about 50,000.
On an average, an Indian credit card holder spends only $755 (Rs 40,000) annually, as against the Australians ($3,352), and even the Thais ($2,084).
With its expansion in Tier II and III towns and cities becoming profitable with 12 per cent of cards reaching there, SBI Cards is now banking on the spread of the Internet to 121 million customers and grow its business by three to four times by 2014-15. India currently has 80 million banked households, he said.
Ticket booking and similar instant payment facilities have boosted the business of SBI Card, particularly after its tie up with the Indian Railways and other agencies and co-branding cards with the Oriental Bank of Commerce, Bank of Maharashtra and the Karur Vysya Bank.
Credit card spend in India is expected to increase from Rs 96,000 crore in 2011 to Rs 120 crore this year. SBI Cards and Payment Services Pvt Ltd, a joint venture with GE Capital, is the only standalone credit card providing company in India. It offers 14 different modes of payment options to customers.

Should you bet your money on NPS?

The National Pension System (NPS), opened to the common public with much fanfare in April 2009, is yet to take off. But there seems to be a growing buzz in favour of the product of late, with the insurance regulator stressing the need for revitalising the pension space and the pension regulator underlining the many advantages of NPS. But does it really merit a place in your portfolio? We try to help you take an informed decision.

Scheme outline 
This is a pension scheme launched by the government, which allows one to invest as little as Rs. 500 a month or Rs.6,000 a year.
There is no upper limit on investments, though tax benefits are available only to the extent of Rs.1 lakh, allowed under Section 80C.
The scheme allows you to choose from three investment options:
a)      In the first option, up to 50% of the investment is in equity, so it is clearly for those in a position to take risk;
b)      The second option is largely a mix of corporate debt instruments and other fixed income instruments from the government, with a small amount dedicated to equities. Understandably, the risk here is lesser than in the first option;
c)       In the third, the investment is mainly in government securities and the exposure to market linked instruments is very small. This, then, is the safest option of the three.
Anyone in the age bracket of 18-60 years can enter the scheme. Maturity will be at 60 years.

Positives 
The management expense in NPS is lower than in any comparable product. This could ensure that you have a bigger corpus by the end of the term, though there is no saying just how big or small your returns will be since there is no guarantee.
Also, since it doesn’t allow withdrawals before the age of 60, the plan could well serve the purpose of compulsory saving.

Drawbacks 
Unlike in tax-saving schemes such as the Public Provident Fund (PPF) or the Employees’ Provident fund (EPF), the money you receive at maturity in the NPS is taxable.
And if experts are to be believed, the post-tax return on these annuities is much less in comparison to what other options such as fixed deposits and Senior Citizens Saving Scheme currently offer.
Also, it does not allow withdrawal of 100% of the amount received at maturity, which is when the policyholder is of the age of 60 years. One has to necessarily use 40% of the amount to buy annuities from insurance companies empanelled with the government.
An annuity assures you of a regular payment — monthly, quarterly, half-yearly or annually, as chosen by you.
In case you need the money before you have turned 60, a withdrawal of only 20% is allowed in lump sum; you have to buy annuities for the rest of the amount.

Expert speak 
“The product has three major problems that take the sheen away from it,” says Manish Chauhan, who runs a personal finance website jagoinvestor.  “First, it offers very little flexibility in terms of product design. Secondly, the maximum investment in equity is limited up to 50%, which may not work in favour of a young investor who should ideally have or who might want greater exposure to equities. The third point is that there is no guarantee on the amount of money you will earn — that’s so paradoxical for a retirement product,” says Chauhan.
The restriction on withdrawals is a sore point, too.
“The fact that there are withdrawal limitations will work well for someone in the low income group. But for any other investor, this doesn’t augur very well,” says Harsh Roongta, CEO, ApnaPaisa.
The preset maturity date at 60 may not stack well either. “For anyone who is entering beyond 55 years of age, this will not work out very well,” says Suresh Sadagopan who runs a Financial Advisory Services.

Should you go for it? 
NPS may not be the best retirement product, suggest experts
Roongta, for one, believes the scheme will become an attractive investment once the Direct Taxes Code kicks in. As per the proposed draft, NPS, provident fund and superannuation schemes will get tax breaks up to Rs. 1 lakh per year. “When this happens, NPS will be the only scheme with an equity component on which tax benefits will be available,” says Roongta. Even so, it would be advisable to cap investments in NPS subject to the limit to which the tax break is available, he adds.

Alternatives to NPS 
Taking a pension plan with the idea of wealth accumulation is not a smart game plan, say experts. A combination of the good old PPF, EPF, mutual funds may work better, they suggest.
Of course, there are withdrawal limits even in the PPF. However, the returns are assured and the maturity amount is tax-free. It’s the same with EPF investments, which are tax-free beyond five years. As for mutual funds, retirement planning is best done through the systematic investment plan, or SIP, route.

Foreign investors lap up SBI dollar bonds

Mumbai, July 26: The country’s largest lender, State Bank of India (SBI), has raised $1.25 billion from investors abroad at 4.125 per cent, for five years. This was the second largest single tranche bond sale that garnered overwhelming response, despite recent concerns expressed by international credit rating agencies on the country’s economy.

SBI’s dollar-denominated bonds were subscribed 5.4 times. They got $6.8 billion from around 350 accounts spread over Asian, European and US investors. The lead managers to the issue were Deutsche Bank, Citibank, Barclays, Bank of America Merrill Lynch, JP Morgan and UBS.

In 2010, SBI had raised $1 billion for five years at 4.5 per cent.

“This issuance has certainly provided a window of opportunity to other high-quality Indian issuers to tap the international bond markets,” said Rajiv Nayar, head of capital markets origination at Citi India. He said the SBI notes were priced at the lowest ever coupon...

SBI raises $1.25 b from overseas bond sale

New Delhi, July 26:  State Bank of India raised $1.25 billion from an overseas-dollar-denominated bond sale on Thursday. This is the largest single-tranche offering by a public sector bank from India.

The bank’s London branch issued 4.125 per cent five-year-notes due in July 2017 at 375 basis points, spread over five-year US Treasuries. The notes offer the lowest ever coupon achieved for an Indian issuer in the US dollar bond market in the five-year tenure, said a banker close to the development. The notes, a debt instrument, are rated Baa2 by Moody’s and BBB- by Standard & Poor’s.

This is also the first public sector bank US dollar bond issuance out of India since May 2011. The last dollar-denominated bond offering by an Indian company was in February when Axis Bank raised $500 million (in the form of five-year medium-term notes) at 440 basis points spread over five-year Treasuries. SBI had hired six global giants — Citigroup, Barclays, Bank of...

SBI's $1 billion international bond issue opens

Mumbai, July 25: State Bank of India on Wednesday launched an international five-year bond sale programme to raise at least USD one billion. When contacted, SBI Managing Director and Group Executive for International Banking Hemant Contractor said that the bank on Wednesday launched its benchmark bond sale through book-building route.
"The issue is open and the details like pricing and the quantum of funds being mobilised will be known only by late night," Contractor said. A benchmark bond issue typically aims to raise more than USD 500 million. According to sources, the bond issue is of over USD 1 billion size with a five-year tenure.
The issue's investment bankers include Bank of America Merrill Lynch, Barclays Capital, Citigroup, Deutsche Bank, JP Morgan and UBS. SBI launched a marketing campaign for its benchmark bond issue on July 16 in Hong Kong, Singapore, London, New York, Los Angeles, Boston, Frankfurt and Zurich.
The bank has a board mandate to raise USD 10 billion from overseas markets over the next few years, and it has a headroom to raise nearly USD 7 billion more since it has raised USD 4 billion. The senior notes offering, which has been rated as 'BBB-' by Standard & Poor's, is a dollar-denominated issue. Giving the 'BBB-' rating on the SBI bond sale, S&P had earlier said this reflects the long-term counterparty credit rating on the bank. "The proposed notes will constitute direct, unconditional, unsecured, and un-subordinated obligations of SBI," S&P said.
SBI's move to raise overseas funds comes in the wake of the recent RBI steps to stem the falling rupee value and measures to encourage foreign debt inflows. Earlier, ICICI Bank and India Overseas Bank had initiated their respective dollar bond plans and had also hired investment bankers, but the offerings were delayed amid tough market conditions.
While Indian Overseas Bank was aiming to raise about USD 500 million, ICICI Bank was eyeing USD one billion through a bond sale. A slew of sovereign downgrades in the past few months have made it difficult for domestic companies to raise overseas debt. So far this year, a sum of USD 4 billion has been raised by two corporates -- USD 3.5 billion by Reliance Industries in two instalments in February and May, and USD 500 million by Axis Bank.
The fourth issue which is underway now, is again from RIL, to raise another USD 1.5 billion, for which market making meetings are beginning tomorrow in Singapore. However, domestic companies had raised over USD 8 billion through dollar bonds in 2011.