Even as Yes Bank became the first Indian lender to raise $225 million to take advantage of the subsidised swap rate offered by the Reserve Bank of India (RBI), other banks are waiting for the outcome of the US Federal Reserve’s crucial two-day meeting, which started on Tuesday, before finalising their plans.
Union Bank of India (UBI) and Indian Overseas Bank (IOB) have already decided to raise tier-1 capital from the overseas market, but are still undecided on the quantum of borrowings. Both banks may look at raising around $500 million, depending on the cost of borrowings.
“We are waiting for the next two days and we are working out the cost as well, as the market is still very volatile,” a senior banker at IOB said. Meanwhile, UBI, too, is assessing the cost advantage, but plans to take a final decision only after the US Federal Reserve’s meeting.
The Federal Reserve’s Open Market Committee is widely expected to announce the tapering of its $85-billion monthly bond purchase programme. Global markets turned volatile after May 22 when Federal Reserve chief Ben Bernanke indicated that the tapering could start soon. Consensus in the market suggests that it may cut its purchases by a moderate $10 billion per month.
Bankers are of the view that a cut in bond purchases of $10 billion or less should not impact the market significantly and could help them raise funds at a lower cost.
Yes Bank raised $255 million ($180 million and €58 million) by way of dual currency, multi-tenure syndicated loan facility at a total cost, including swap cost, of about 8.5-8.75%.
“The facility has a maturity of one and two years with majority commitments coming in the two-year tenure bucket. The loan has been distributed with commitments from 11 banks representing eight countries across the US, Europe, Middle East and Australia. The facility shall be utilised for general corporate purposes and trade finance,” Yes Bank said in a statement. The lead arrangers and book-runners for the transaction included ANZ Banking Group, Citigroup Global Markets Asia, HSBC, Standard Chartered Bank and State Bank of India.
Earlier this month,