SBI to raise $5 bn via offshore loans

New Delhi: The country's largest lender State Bank of India said on Friday that it plans to raise USD 5 billion through offshore loans by December.

“We hope to raise USD 5 billion debt by December by means of foreign debt through medium-term notes (MTN),” said SBI Chairman Pratip Chaudhury.

Speaking on the sidelines of a meeting between Finance Minister Pranab Mukherjee and chiefs of public sector banks, he said the debt would be raised during the second or the third quarter of this fiscal.

“Right now, we have a total objective of USD 5 billion, but we would like to time the market in the second and third quarters. We will be raising the funds, but there has to be visibility of credit growth. If there is demand for assets, we will go and raise it,” said Chaudhury.

MTN is a kind of bond note with a maturity period usually between 5 to 10 years continually offered through various brokers, rather than issued all at once like other bonds.

The SBI chief said the bank is confident of maintaining its net interest margin (NIM), which is a measure of the return on a company's investments relative to its interest expenses, at 3.5 per cent this fiscal.

“The margins are improving. This current fiscal we have a guidance of 3.5 per cent (NIM) and we are slightly ahead of it. Overall guidance is 3.5 per cent and we are on track,” said Chaudhury.

He said SBI is also looking at increasing its credit growth by 16-19 per cent in 2011-12.

Regarding recent hikes in rates, Chaudhury said: “Raising of interst rate has not impacted interest margin.” SBI had on Thursday increased lending rates by 25 basis points and deposit rates by up to 100 basis points, a move that will make home, auto and other loans more expensive, but will provide better returns to savers.

The bank revised the base rate or the minimum lending rate upward by 25 basis points (bps), or 0.25 per cent, to 9.50 per cent with effect from July 11.

The interest rates on fixed deposits with a maturity period of 1-10 years has been fixed at 9.25 per cent. The new deposit rates will also be effective from July 11.

The bank has also raised its benchmark prime lending rate (BPLR), which is used to determine floating interest rate loans, to 14.25 per cent from 14 per cent.

The decision follows the rate hike announced by the Reserve Bank in its policy review last month. Several banks, including major private lender ICICI Bank, Canara Bank and Bank of Baroda, have already raised their lending rates.

Asked about inflationary pressure, which has prompted the RBI to hike rates 10 times since March, 2010, Chaudhury said: “Inflation is continuously above 7 per cent. So any policymaker would be worried.”

Headline inflation stood at 9.06 per cent in May and is expected to breach the double-digit mark in July due to the recent hike in prices of diesel, cooking gas and kerosene.

Source: Financial Express