IDBI Bank raises $102 m thru issue of ‘Dim Sum' bonds

Indian banks are increasingly diversifying the markets from which they can raise foreign currency resources. IDBI Bank on Wednesday said it has raised Renminbi (RMB) 650 million ($102 million) by issuing three-year ‘Dim Sum' bonds to investors in the Hong Kong and Singapore markets.

In the last one year or so, Union Bank of India and State Bank of India had raised funds by issuing bonds denominated in Swiss Francs. Previously, banks used to raise funds predominantly in dollars.

The bank originally intended to mop up RMB (Chinese currency) 500 million but scaled up the issue size to RMB 650 million due to robust demand from investors, said Mr Melwyn Rego, Executive Director.

The public sector bank has raised the resources through its Dubai International Financial Centre branch under its $1.5 billion medium term note programme at a coupon rate of 4.50 per cent. The issue was lead managed by HSBC.

‘Fast expanding'

“The Dim Sum bond market is a fast expanding market, driven by the growth of offshore RMB deposits. Raising funds through the Renminbi-denominated bonds proved to be about 100 basis points cheaper than dollar-denominated bonds,” said Mr Rego.

According to Mr R. M. Malla, Chairman and Managing Director, the bank's decision to access the overseas market through Dim Sum bonds last week is in line with its objective of achieving low-cost funding as well as diversifying its investor base.

Proceeds from the bond issue will be used to provide foreign currency loans to Indian corporates. Out of its $1.5 billion MTN programme, IDBI Bank has so far raised $450 million.