SBI has room to raise $4.8 b more

Pratip Chaudhuri (right), Chairman, and H. G. Contractor, Managing Director, State Bank of India, at a press conference in Mumbai on Friday. Photo: Shashi Ashiwal

State Bank of India has raised $1.25 billion at a fixed interest rate of 4.125 per cent per annum, indicating the lowest-ever coupon achieved by an Indian issuer in the U.S. dollar bond market for a five-year tenor. The notes will mature on August 1, 2017.

“We have head room to raise another $4.8 billion from overseas,” said Pratip Chaudhuri, Chairman, SBI, here, on Friday, while addressing a press conference. This offering marks the first public sector bank U.S. dollar bond issuance out of India since May 2011 and the largest single-tranche offering.

The offering was priced at a spread of 375 basis points over the five-year U.S. Treasury, equivalent to an yield of 4.318 per cent per annum.

The total order book was in excess of $6.8 billion and was oversubscribed 5.4 times “underscoring SBI’s strong credit profile and its position as India’s largest bank.”

Mr. Chaudhuri said that “the offering underscores the confidence of the global investor community in our business and is a ringing endorsement of the faith of the global investor community in SBI in these challenging times.”

CRR cut

SBI Chairman also made a pitch for cutting the cash reserve ratio (CRR) in the forthcoming first quarter review of Monetary Policy on July 31.

“Rupee is a good currency for deposit but not a good currency for bonds. We think there is a case for bringing down the CRR and that will have an effect of cooling interest rates,” said Mr. Chaudhuri, adding, “I am expecting a cut of 50 basis points.”

He said the foreign currency loan book of SBI was expected to grow by 9 per cent in the current financial year.