Banks throng global markets for funds

Foreign Currency Non-Resident Bank 50,79658,11068,086 Foreign currency Borrowings *45,53963,72261,470 Non-resident External Rupee85,811

1,00,310

1,12,907

Non-Resident Ordinary Rupee Deposits6,3935,4496,855 Own Issues of Securities/Bonds29,2354,85610,036 Other Liabilities22,60955,50679,258 ADRs/GDRs9,91014,83523,515 Equity of Banks Held by Non-residents3,23028,43840,328 Capital/remittable profits of foreign 
banks in India and other unclassified 
international liabilities9,46912,23315,415 Total International Liabilities2,54,9993,06,6093,60,698 * Inter-bank borrowings in India and from abroad and external commercial borrowings of banks. ** Including IMD/RIBs
Source: Locational Banking Statistics  Similarly, Bank of India has syndicated a loan of over $250 million at 63 bp over Libor, while its bonds are trading at a spread of 150 basis points.  Bank of Baroda is also scouting to raise around 300 million through loans and Indian Overseas Bank may raise $100 million, according to merchant bankers.  Dealers explained that while nothing is fundamentally wrong with the bonds issued by Indian banks, the spreads have widened due to the bearish sentiment globally.  There is higher risk aversion vis-a-vis emerging markets, as the weak non farm payroll data released in the United States last week triggered fears of a recession, explained a bond dealer.  Loans are being preferred over bonds. While investments in bonds require a provision for possible losses arising from a rise in interest rates, loans need not be marked to market and are hence valued at market rates.  Moreover, the Indian banks are taking loans through corresponding foreign banks with whom they have extended credit lines and tie-ups for foreign operations. In other words, these are bilaterally arranged loans.  Bond syndication, on the other hand, requires a wider participation of foreign banks, said a dealer.  A merchant banker explained that most Indian banks raise money for catering to the daily operations of their foreign branches through senior bonds or as part of capital enhancement through upper tier II or perpetual bonds.  While most of the banks have altogether stopped issuing the upper tier II or perpetual bonds, those raising senior bonds have shifted their borrowing plans to loan syndication.