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.
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.
Published on June 12, 2026
