Top Indian state lenders eye first dollar bonds since RBI subsidy, sources say

MUMBAI: State Bank of India and Bank of Baroda are set to become the first users of the Reserve Bank of India’s subsidised hedging window for overseas borrowings, with plans to raise about $1 billion through five-year dollar bonds, three sources said on Friday.

The state-run lenders are each targeting around $500 million, the sources said.

Neither bank responded to Reuters requests for comment. The sources requested anonymity as they are not authorised to speak to media.

“Both the banks will aim to complete the issue before the end of this month, as they had been waiting for the central bank’s facility to be formalised,” one of the sources said.

The Reserve Bank of India said this week that external commercial borrowings with an average maturity of at least three years by state-run companies would qualify for a swap facility at a fixed rate of 1.5% per annum, compounded semi-annually.

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The facility lowers hedging costs, making overseas borrowing cheaper for companies and banks.

“With 150 basis point of hedging discount, the all in landed cost for these lenders should be around 6.25%-6.50%, which is cheaper than their local cost of borrowing,” another source said.

Merchant bankers expect inflows of around $15 billion to $20 billion through this route over the next six months.

In September 2025, SBI, the nation’s lender had raised $500 million through five-year dollar denominated bonds at a coupon of 4.50% payable semi-annually.

While SBI has maturities of dollar bonds worth around $750 million coming up later this month and in July, Bank of Baroda currently has no outstanding dollar debt, according to financial data aggregator Cbonds.