The domestic banks, be they state-owned or the private sector, are increasingly tapping the international markets to issue bonds to meet their fund requirements, with the latest being the state-run Bank of India (BoI) which has raised $500 million through a bond issue.

Bank of India on Saturday said it tapped the international markets to raise $500 million under its medium-term notes (MTN) programme at an interest rate of 4.75 per cent. The bonds have been swapped into a floating rate of 175 basis points above LIBOR (London Inter-Bank Offered Rate).

Book size

An MTN programme allows an issuer to raise funds on an ongoing basis through various products such as floating rate notes or on a fixed rate after obtaining prior regulatory and other approvals. With this, the bank has so far raised $1 billion under its $2-billion MTN programme, which was launched in 2005. The lender approached international investors with its road show in February for the $500 million issue but later deferred it for sometime as market conditions were not favourable. The book size of the issue was $4 billion and orders were spread over 300 quality investors, the bank said.

On Friday, the third largest private sector lender Axis Bank said that it raised $350 million through a bond issue, under its $2-billion euro MTN programme. Other lenders, who have tapped the MTN route to raise funds include State Bank of India and ICICI Bank. State Bank has so far raised $2.9 billion through this route, while ICICI Bank raised $750 million last year.

The government-owned IDBI Bank is also understood to have plans to go in for an MTN issue under which it plans to raise around $1.5 billion.

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