Canara Bank rides dollar debt wave under RBI subsidy scheme, bankers say

MUMBAI: India’s Canara Bank has raised $200 million via dollar bonds under the central bank’s subsidised hedging facility, two merchant bankers said on Thursday, joining India’s second-largest private lender by assets ICICI Bank.

The state-run lender issued these notes, set to mature in September 2028, at a spread of 87 basis points over the corresponding U.S. Treasury yield, the bankers said, requesting anonymity as they are not authorised to speak to the media.

Canara Bank did not reply to a Reuters query seeking comment.

The net proceeds will be used for general corporate purposes or to meet funding requirements of the GIFT City banking unit or any other offshore branch, the bankers added.

In June, the Reserve Bank of India introduced a swap facility allowing eligible external commercial borrowings by banks and state-owned companies to be hedged at a fixed rate of 1.5% per annum, compounded semi-annually.

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The measure significantly lowers hedging costs, making overseas dollar fundraising more attractive.

This is the first dollar debt sale from the lender in nearly two years.

In September 2024, Canara Bank had raised $300 million through the primary five-year bond issue, at a coupon of 4.8960%.

ICICI Bank is also in the process of issuing five-year dollar bonds.