PSBs put overseas fund-raising plans on hold

Written by Kumud Das | Sitanshu Swain | Mumbai | Updated: Aug 9 2011, 06:54am hrs
As an immediate fall out of the move to downgrade US by the international rating agency S&P, major public sector banks, including State Bank of India (SBI), have deferred their plan to raise funds to the tune of $8 billion from the overseas markets.

Other government-owned banks that have put off their overseas issues include Indian Overseas Bank, Syndicate Bank, Allahabad Bank and Indian Bank as they are not sure whether they can raise funds in a competitive rate.

Speaking to FE, SBI chairman Pratip Chaudhuri confirmed the banks plan to postpone overseas borrowing plan. We did have plans to raise $5 billion from overseas markets over the next five to six months, but now we have deferred it for the time being. We will have to first see the visibility of assets before going for it, he said.

Saying that the downgrade of US by the S&P is a non-event for the Indian economy. Chaudhuri said he expects that yield on Indian bond market will also go up by up to 15 basis points in the short-term.

Nupur Mitra, executive director, Indian Overseas Bank, said in the light of present US crisis, the bank has put its plans to raise sum of $200 million to 300 million from the overseas markets on hold.

When we had raised $500 million for our Hong Kong branch in the recent past, we had got a finer rate, but we are not sure of getting cheaper rates, Mitra said.

MR Nayak, executive director, Allahabad Bank, also confirmed that the bank had plans to raise $500 million from markets like in Hong Kong, Singapore and London to fuel its overseas growth of through markets. Now, we will wait for the dust to settle before we plan to go for it, Nayak said.

Syndicate Bank and Indian Bank, which were planning to raise $500 million and $ 1 billion respectively from the overseas markets have also postponed their plans.

However, the status of Axis Banks $240 million US commercial paper (USCP) programme, which was announced last week, is not yet known. The bankers have further said there might be a softening impact on global commodity prices which will make the Reserve Bank of India to opt for a rate pause.

Keki Mistry, vice-chairman and chief executive officer, HDFC, said, Globally commodity prices may soften and help RBI to curb inflation. The RBI can go for rate pause.

However, MD Mallya, chairman and managing director, Bank of Baroda, said it is too early to say if there will be any impact on the Indian economy and on the domestic banking sector in particular.

When it comes to the Indian banks, except for a few, most of them have raised money overseas in either south-east Asia or European countries in past. Secondly, Indian banks presence abroad is mostly meant for doing trade finance business that too for the Indian corporates present in those countries. Hence, they are not likely to be affected by this crisis.

Anjan Barua, head, treasury, SBI, said Indian corporates have started diversifying their overseas borrowing plans to various south-east Asia or even in Africa countries in the aftermath of global financial crisis. When it comes to the SBI, the bank has got a liquidity surplus of R40,000 crore or $9 billion.

So, we can manage our things properly. We have presence in New York, Washington, Chicago and Los Angeles. The rupee was likely to appreciate further, Barua said.