The State Bank of India will hit the overseas market with its Millennium India Deposit scheme on October 23. The Reserve Bank of India cleared the proposal last weekend.
SBI will bear one percentage point of the exchange risk per annum while the rest will be borne by the Centre. In other words, the SBI will meet one per cent of the rupee depreciation against the dollar every year. The average depreciation of the rupee per annum is pegged at 5-6 per cent.
The scheme will remain open for one month but the SBI can close it even earlier depending on the response of the non-resident Indians to the scheme. The core size of the issue has been fixed at $ 2 billion but collecting banks have given a commitment to raise over $ 5 billion.
The issue will be dominated in three currencies : dollar, pound sterling and euro. The dollar denominated instrument will carry a coupon of 8.5 per cent, the pound sterling deposit 8.15 per cent and the euro 7.25 per cent.
The bank is planning to offer 1.5 per cent brokerage to the collecting banks besides a quarter percentage (25 basis points) collection charges. According to the scheme participating banks will get 50 per cent of the collected amount as rupee loan at 10 per cent as deposit for five years. However, most of the public sector banks and a few private banks are unwilling to bite the bait as they are finding the cost of funds (at 10 per cent) too high.
