HDFC, BoB raise $1.5 bn from overseas

Mumbai: HDFC Bank and Bank of Baroda (BoB) have raised a cumulative $1.5 billion from overseas loan market in the past week as Indian lenders shore up liquidity amid stabilising rates. HDFC Bank raised $1 billion through a three-and-a-half year loan while BoB raised $500 million earlier this week through a five-year pact. Japan’s Mitsubishi UFG Financial Group (MUFG) and Hong Kong and Shanghai Banking Corp (HSBC) were involved in the transactions.“MUFG was the sole lender in the HDFC Bank transaction, which was priced at 94 basis points above the three-month benchmark SOFR (secured overnight financing rate) for a three-year period. HDFC Bank has raised the money from its GIFT branch for its on-lending purposes, which is a rare borrowing for the bank,” a person aware of the transaction said on condition of anonymity.A basis point is a hundredth of a percentage point.An HDFC Bank spokesperson did not reply to an email seeking comment. An MUFG spokesperson declined to comment.126064042This is the first time in two years that HDFC Bank has raised such a loan. In December 2023, India’s largest private sector bank had initially borrowed $500 million from MUFG and later increased it to $1 billion through a term loan syndication from a clutch of 23 banks across the world.HDFC Bank’s loan was priced at 5.01% given that the three-month SOFR is currently 4.07%. It was priced at a tighter rate than the 110 basis points above the three-month SOFR pricing of two years ago. BoB’s $500 million was priced at 98 basis points above the three-month SOFR or at about 5.05%. Besides MUFG, HSBC was the other bank in that deal, with the $500 million loan equally divided between the two lenders.A BoB spokesperson did not reply to an email seeking comment, while an HSBC spokesperson declined to comment.“Despite the global volatilities India, especially the financial sector, remains well placed. There are also investors and banks out there wanting to lend. So, when a bank like HDFC comes, which is rare, it gets good rates. Then, of course, HDFC also wants to balance its strong loan growth and so it is raising resources,” said a second person aware of the details.A sovereign credit rating upgrade in August and strong loan growth and asset quality in the financial services sector has made Indian banking, financial services and insurance companies attractive globally. In August, S&P Global Ratings upgraded India's long-term sovereign credit rating to 'BBB' from 'BBB-', the first upgrade in 18 years, citing strong economic growth, improved monetary policy credibility and sustained fiscal consolidation.Indian banks are making the best use of this newfound confidence in the financial sector. In September, State Bank of India raised $500 million by selling bonds to international investors at the tightest pricing for an Indian entity ever, at 75 bps above the five-year US treasury yields.