In order to generate up to $500 million through a worldwide bond issue—the timing of which has not yet been determined—the State Bank of India has reportedly reached out to foreign institutions.

The largest lender in the nation is anticipated to formally engage investment banks for the proposed offer next week; the size of the issuance may be increased depending on investor reaction, the people added. The issue’s arrangers are likely to be chosen from among European, Japanese, and American banks.

“SBI has made initial inquiries with foreign banks to raise approximately $500 million through the issuance of US dollar-denominated bonds under Reg S/144 A,” a direct source reported. The bank is seeking funding and is closely monitoring the impending FOMC (Federal Open Market Committee) meeting, which is planned for the first week of May.

Bond sales resume after a break

On April 18, SBI received board clearance to issue foreign currency bonds to raise $2 billion. Over the course of FY24, it anticipates issuing the bonds in installments.

For their finance requirements, Indian banks and non-bank financiers have frequently turned to international markets over the years. Issuers are now required to pay proportionately more to raise money from the global market as a result of the global benchmark rates, to which the funding costs are linked, rising fairly dramatically from near-zero levels not too long ago.

SBI owns notes with maturities in September 2023 and early 2024, totaling $600 million and $800 million, respectively. Even if the bank’s board has given the go-ahead for it to issue $2 billion in foreign currency bonds, it currently has enough liquid assets to cover any repayment obligations. For the first time ever, SBI raised such debt in February when it secured a $1 billion syndicated social loan.

Global bond issuance experienced a brief lull, but recent funding rounds by REC and ReNew Power signal that the market is starting to recover. ReNew Power raised $400 million in green bonds last week at a yield of 8.15%, or 35 basis points under its initial price target of 8.5%. REC previously raised $750,000,000,000 at a rate of 5.69 percent.

However, SBI’s borrowing costs will be equivalent to those of other local banks. Another source stated that Kookmin Bank in South Korea will likely serve as the standard for SBI’s pricing. Kookmin recently increased a five-year bond for 95 basis points more than the US government rate for the same period.

The high-standing and quasi-sovereign position of SBI will be taken into account when pricing its bonds. According to sources, the price of SBI’s bond is predicted to be 120–140 basis points higher than the current five-year US treasury rate of 3.62%. According to the reports, the bank might wind up paying roughly 5%.