National Bank for Financing Infrastructure and Development (NaBFID) is planning to raise $4 billion under the Reserve Bank of India’s special forex swap facility, a senior official said. The funds will help the state-owned lender implement its Rs 1 lakh-crore investment plan for infrastructure projects. The majority of the investments are earmarked for the renewables and road sectors.
“We are in talks with banks to finalise the capital raise and are looking at a rate of 120 to 130 basis points above SOFR,” the official said on condition of anonymity. SOFR is the secured overnight financing rate, a benchmark rate used to price, inter alia, US dollar loans.
Banks and multilateral agencies are in discussions with the borrower, the official added. A diversified funding base is needed to support infrastructure projects such as mega highways, ports, roads and airports which are central to the country’s growth plans. In February, NaBFID secured about $125 million from HSBC Holdings Plc to diversify away from purely local debt and step for the first time into foreign currency borrowing.
For the quarter ended June, NaBFID’s total credit exposure of stood at Rs 1.28 lakh crore, up 99.43% on year-on-year basis and 9.66% sequentially. The exposure includes loan and advances of Rs 1.09 lakh crore, investments in bonds of Rs 16,479 crore and non-fund exposure of Rs 2,447 crore.
The concessional swap window for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) is open until December 31 while for fresh FCNR (B) deposits the deadline is till September 30.
HDFC Bank was the first to tap the overseas markets under the RBI’s special swap window by raising $750 million via dollar-denominated senior unsecured notes priced at 90 basis points over the 5-year US Treasury, with a yield of 5.067%. Public sector undertakings like PFC and REC have also raised money under the scheme. PFC has raised $600 million in two tranches under this special swap window.
State-run Indian Oil Corporation (IOC) raised $500 million through a five-year ECB under the scheme. The Reserve Bank of India (RBI) absorbs a major share of hedging expenses by fixing the concessional swap cost at 1.50% per annum, effectively bearing more than half of the prevailing market forward premium (which had exceeded 3.5%–4%) to make External Commercial Borrowings (ECBs) viable for Public Sector Undertakings (PSUs).
The facility is available until December 31, 2026 where public sector undertakings and banks can raise foreign funds.