IDBI seeks breather on foreign borrowing norm

IDBI has urged the RBI to consider its overseas borrowings after April 1, 2005 for compliance with the external borrowing regulations, IDBI sources said.

Banks are allowed to borrow overseas to the extent of 25 per cent of their Tier I capital for domestic lending. Tier I capital includes paid up equity, reserves and Tier I bonds. IDBI's foreign currency borrowings are already in excess of the 25 per cent ceiling.

IDBI's foreign currency borrowings totalled Rs 4,998.10 crore as on September 30, 2004, which are 62.75 per cent of the bank's Tier I capital of Rs 7,965.39 crore.

The bank has subsequently raised $250 million overseas and will be mobilising another $50 million by mid March 2005. The Tier I capital includes Rs 652.83 crore of equity, Rs 5,182.06 crore of reserves and Rs 2,130.50 crore of bonds.

An IDBI official said: "We are in discussions with the RBI for allowing us to keep our foreign currency borrowings till March 31, 2005, outside the ambit of the overseas borrowing ceiling."

"Most of the foreign currency borrowings are on account of the special packages for textile, cement and steel sectors. These are legacy borrowings appearing as pass through on the books of accounts and hence need to be treated differently," the official said.

IDBI and IDBI Bank are in the process of being merged and their balance sheets will get integrated as of March 31, 2005. The foreign currency borrowings of IDBI are much above the ceiling even after considering IDBI's consolidated Tier I capital of Rs 8516.37 crore.

The outstanding foreign currency loans extended by IDBI to Indian corporates aggregated Rs 4,413.10 crore as on September 30, 2004, down from Rs 5,676.90 crore as on March 31, 2003.

IDBI is raising $50 million through yen bonds to take advantage of the very low interest rates on the Japanese currency borrowings. The yen funds would be swapped into dollars subsequently.

The cost would be 92 basis points above yen Libor or 100 to 105 basis points above dollar Libor. It had raised $250 million in December 2004 at Libor plus 120 basis points.