The State Bank of India [Get Quote] (SBI), the country's largest lender, has come to Tata Steel's [Get Quote] aid for completing the fund-raising for its $12.9 billion acquisition of Anglo-Dutch steelmaker Corus.

The bank has agreed to provide up to $1 billion to Tata Steel's special purpose vehicle, Tata Steel UK, to refinance $7.2 billion of bridge loans taken for the biggest buyout by an Indian company.

"We have approved a loan of $800 million to $1 billion to Tata Steel," said a senior SBI official. A Tata Steel spokesperson confirmed that the company was availing of the loan from the SBI.

Tata Steel had to turn to the SBI after some foreign banks backed out, thanks to the sub-prime crisis in the US and the credit squeeze that followed.

According to reports, about $500 billion of fund-raising has been caught in a global credit logjam caused by risk aversion among banks and otherinvestors.

This is also the first acquisition financing of this size provided by the SBI, which till now was involved in deals of less than $100 million (Rs 410 crore).

"In February, the SBI had raised close to $700 million -- $300 million under the medium term note programme and $400 million through innovative perpetual debt instruments -- which could have been used to fund the acquisition. The company (Tata Steel) did not avail of the loan then, but now it wants it," said the SBI official.

Early last month, Tata Steel had to agree to pay 50 basis points more on a $1-billion, seven-year loan as the banks participating in the loan syndication bargained with the underwriters for higher yield. The loan's underwriters were ABN Amro, Citigroup and Standard Chartered.

There has been as much as 200 basis point increase in credit spreads on Indian loan and bond issues since the last week of July, when the sub-prime crisis first struck international credit markets.