SBI raising $250 million to fund overseas operations

The State Bank of India (SBI) is raising a $250 million foreign currency loan for funding its overseas operations.

It will be a short-term facility maturing in 364 days and has been priced at approximately 32-33 basis points over the London inter-bank offered rate (Libor), banking sources said.

The Citigroup is arranging the loan. An SBI executive said the bank has centralised its overseas borrowing plans to cut down the cost of funds.

"Our overseas balance sheet grew by over 40 per cent last year. This money can be disbursed to Indian companies looking for dollar loans. The assets will be booked overseas," he said.

Bankers active in overseas syndication of foreign currency loans said that the rates compare well in the international market.

This is because the ongoing rates for such a tenure is around 40 basis points over the Libor. For the sake of comparison, in rupee terms the rates come to 2.25 per cent if the loan has to be fully swapped into rupees.

However, in this case, the bank does not need to do a swap as the loans will be officially raised by one of the international branches of SBI and will be parked overseas.

Most of the international branches of Indian banks are facing shortage of dollar funds as most of it has been on lent.

According to banking sources, the fund will be mobilised from its branches in Europe and East Asia.

For 2002-03, foreign offices of SBI made a net profit of Rs 109.90 crore and have mobilised $138.22 million long-term foreign currency funds by way of structured deals worth $138.22 million for providing long-term funds to the banks' foreign offices and reducing asset liability mismatch.

While the foreign subsidiaries had a drop in profit, the joint ventures abroad showed improved performance.