HDFC Bank is considering a dollar bond of up to $1 billion, while Federal Bank, Kotak Mahindra Bank, RBL Bank and Yes Bank could raise $250-$500 million each.
Banks are rushing to tap the RBI’s concessional forex swap window, which offers funding at a 1.5% annual rate and closes on December 31.
Lenders are also chasing FCNR deposits from NRIs before the separate September 30 deadline, with HDFC Bank and ICICI Bank already attracting billions of dollars.
Why HDFC Bank, Kotak, Yes Bank Are Rushing To Tap Dollar Funding
Five private lenders, led by HDFC Bank, are eyeing up to $3 billion in dollar funding as banks rush to take advantage of cheaper RBI-backed forex swaps before the December deadline
US dollar
Summary
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Five private Indian lenders are preparing to raise up to $3 billion through dollar-denominated bonds or loans, according to Bloomberg.
HDFC Bank, the country's largest private lender, plans to raise up to $1 billion through a dollar bond sale, people familiar with the matter told Bloomberg.
The bank is currently in talks with foreign lenders to launch the issue in the coming weeks, although the conditions are not yet final and remain subject to alteration, the people added.
Meanwhile, Federal Bank, Kotak Mahindra Bank, RBL Bank and Yes Bank are separately considering raising between $250 million and $500 million each.
The banks will secure these funds either through bond issues or loans. None of these four institutions have regularly issued debt in the overseas dollar market.
Representatives for all five banks did not respond to requests for comment regarding their debt-raising plans.
Tapping Concessional RBI Swaps
The Reserve Bank of India's discounted forex swap mechanism, provided to banking institutions and government-owned companies since June, drives this capital raising.
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The central bank guarantees a yearly interest of 1.5% for durations averaging three years or more, which is cheaper than prevailing market rates.
The concessional swap window closes on December 31. This deadline has prompted a rush among lenders to secure dollar debt, firing up India's debt markets.
State Bank of India, the nation's biggest lender, is also active in the market and may price a dollar-denominated five-year benchmark bond on Tuesday, a person familiar with the matter told Bloomberg.
If completed, it would be HDFC Bank's second dollar bond issue since tapping the market in June. The lender raised $750 million from a five-year debt sale, its first since 2024, following RBI initiatives to increase inbound capital to prop up the Indian currency.
The bank secured its tightest-ever spread on a dollar bond issue with that sale, highlighting strong buyer appetite even in the face of recent corporate governance challenges.
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Chasing NRI Dollar Deposits
Lenders are also rushing to secure foreign currency non-resident (FCNR) deposits before a separate central bank deadline.
The FCNR window, permitting India's 35 million expatriates worldwide to maintain foreign exchange accounts at appealing interest yields, ends on September 30.
The FCNR window "is a great opportunity and we are focusing on that", HDFC Bank Chief Executive Officer Sashidhar Jagdishan said during an earnings call last month.
HDFC Bank currently offers up to a 6.25% rate on some dollar deposits. The lender had drawn $5.42 billion in FCNR money as of July 30. By comparison, its closest peer, ICICI Bank, accumulated $6.06 billion in FCNR deposits by the same date, according to central bank data.