SBI to lend $500 mn, redeem securities worth $800 mn

State Bank of India, which raised $1.25 billion from foreign territories earlier this month, will use a portion of the funds to repay securities that are coming up for redemption; it will also extend credit facilities of about $500 million.

According to a senior SBI executive, the country's largest lender had issued bonds in the past and that would mature in the next few months. “The estimate of repayments is pegged at around $800 million,” said the official.

“The funds were raised because of two reasons. One is business in the pipeline, as there are requests for loans to the tune of $400-500 million. Those have to be met,” the official added.

SBI had mopped $1.25 billion in overseas debt sale through a dual tranche bond programme. The bank raised $750 million in five-year money at US treasury interest rate plus 205 basis points (bps), while it priced the 10-year, $500-million issue at 225 bps over the treasury.

The bank had given an initial pricing of 240 bps over the US treasury for the five-year money and 265 bps over the treasury for the 10-year bond.

According to officials, business opportunities in overseas markets remain

challenging. About 70 per cent of the overseas loan book is India-related, which means credit extended to domestic companies operating abroad. If things do not work out back home, the overseas book would also be affected, said the SBI executive quoted above.

However, the lender was able to maintain asset quality of its overseas operations better than its domestic ones. “We do not have the same kind of NPA (non-performing asset) problems as seen domestically. SBI has been choosy about names it lends to," he added.

SBI's overall gross NPA as on end-December 2013 was close to Rs 68,000 crore ( Rs 680 billion) or 5.73 per cent of its gross advances.

The growth prospects for international operations hinge on what happens in India. If the slowdown prolongs, then the pace would remain subdued, SBI executive noted.

The nature of overseas business is equally divided in trade finance (funding of exports and imports), which are short-term in nature and are basically terms loans to Indian companies, another executive said. Overseas book in dollar-term balance sheet has been growing steadily at 8-9 per cent. International advances increased from Rs 1,69,065 crore to Rs 2,17,695 crore in December 2013. In rupee terms, it showed an uptick due to a sharp drop in the value of Indian currency in the first half of 2013-14.