Did you know that even banks need to borrow money to operate? In a recent revelation, the State Bank of India is planning to borrow some money, up to 1.25 billion dollars. According to reports, this would become the largest dollar-denominated loan from the financial sector of the nation this year.
Although SBI did not respond when seeking comment, according to reports, SBI, the largest Indian bank, is securing a loan for general business purposes. The loan is set to be arranged through its branch in Gujarat International Finance Tec-City (GIFT City), a new financial center in India. SBI is also working in collaboration with other financial institutions to provide this loan.
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Reports suggest that banks like CTBC Bank, HSBC Holdings Plc, and Taipei Fubon Bank are arranging the five-year loan. This loan carries an interest margin of 92.5 basis points. This is higher than the Secured Overnight Financing Rate (SOFR), which is a risk-free benchmark rate.
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SBI's Plan-
This year, SBI is collaborating with other local institutions in borrowing money from foreign sources. With strict rules and regulations in the country, non-banking institutions, or so-called shadow banks, have been tapping dollar-denominated facilities.
The last non-banking financial institution to ask for such an amount is Cholamandalam Investment & Finance, seeking a $300 million syndicated term facility. Other than that, local financier Union Bank of India’s Sydney branch is marketing a $125 million ($81 million) three-year loan, and Bank of Baroda is raising a $750 million borrowing.
As reported by Bloomberg, even after all this, India's dollar loan volume has gone down by 27% to $14.2 billion this year, marking the absence of large company borrowings. According to data compiled by Bloomberg, in July, State Bank raised a $750 million, three-year loan.