PSU lender IDBI Bank expects to increase the size of its medium-term notes (MTN) programme from the current $1.5 billion to $2.5 billion by January next year, a senior executive said on Thursday. Melwyn Rego, executive director at IDBI Bank, said that the bank has already raised $720 million under the MTN programme and has headroom to raise a further $780 million. Since we expect to raise another $750million-$1 billion worth of foreign currency debt this year, we will look logically look at expanding our MTN programme size by $1 bn, he said.
MTN is a debt instrument through which a bank/company raises capital at cheaper rates from the overseas market. Usually, there is a fixed coupon or interest rate that is paid by the issuer to the subscriber of the issue on maturity. It allows banks to raise funds on an ongoing basis through instruments like floating-rate notes and fixed-rate bonds.
On March 16, IDBI Bank launched a Swiss Franc (CHF) denominated bond of CHF 110 million at an annual coupon rate of 3.125%. The issue was oversubscribed by private banks and high net worth individuals (HNI). IDBI's MTN is listed both on the Singapore and Switzerland stock exchanges.
Indian corporates are looking to raise funds from Switzerland despite the rupee depreciation as the hedged cost of fund is still cheaper than rupee borrowings, said Rego. IDBI Bank is the first Indian bank to make a CHF bond issue in 2012.
Over the last year and a half, apart from banks like Union Bank of India, SBI and Exim Bank, non-banking companies like Rural Electrification Corporation (REC) have also tapped the Swiss debt market. Indian firms raise debt at around 9% levels (including hedging cost) in Switzerland ,compared to the 12% levels for rupee loans. Additionally Rego said that IDBI Bank has roped in 8 banks/financial institutions to partner it in incorporating an NBFC called IDBI Infra Fin , that will float a domestic infrastructure debt fund.
The equity base of the NBFC will stand at R300 crore, with IDBI holding 30% stake.