SBI's bond issue success brightens up prospects for others

Trying to reduce their cost of funds either through increasing their low cost deposit base or accessing cheap resources is becoming important for banks these days. They are trying to protect spreads and margins at all costs, especially in the current rate scenario. Raising cheap money from abroad seems to be a no-brainer. However global sentiments are weak and the credit rating of India and its banks have been downgraded. But, India's largest bank Securities and Exchange Board of India (SEBI) seems to have finally broken ground. The bank raised US$ 1.25 bn from overseas investors at 4.125% for a five year period. These dollar bonds were subscribed 5.4 times. The bonds received US$ 6.8 bn in bids from around 350 accounts spread across Asian, European and US investors. The success of this offer has now opened a window of opportunity to other good-quality Indian issuers to tap international bond markets. A number of banks have been waiting on the sidelines since April on account of risk aversion from overseas investors. Maybe we can expect to see a few more bond issues soon.