HDFC Sets to Raise Offshore Loan to $1 Billion

Housing Development Finance Corp (HDFC) is poised to become the first Indian borrower to benefit from the Reserve Bank of India's (RBI) relaxed rules on external commercial borrowings by increasing its foreign loan to approximately $1 billion from $750 million previously. The cost of funding won't change.

According to the bank sources, the State Bank of India (SBI) will participate in the syndication process, which has already received participation confirmations from Mizuho Bank, MUFG, and Standard Chartered Bank.

The largest mortgage lender in the nation will utilize the funds to make loans to people looking to purchase affordable, low-cost houses. The loan's duration has finally been set at three years.

After adding around 115 basis points to the Secured Overnight Financing Rate (SOFR), a benchmark rate used around the world, the loan could be priced. 0.01 percent is one basis point.

An executive involved in the exercise said, "The borrower and banks are negotiating the subject, and the deal is closing now. Recently, the central bank unveiled a host of initiatives to support declining foreign exchange reserves and halt the rupee's decline versus the dollar.

By increasing the cap on the External Commercial Borrowing (ECB) vehicle from its current cap of $750 million to $1.5 billion, it gave businesses more room to access the offshore lending market.

The present maximum on this level is 500 billion; a local borrower using the ECB option may also offer up to 100 basis points more to foreign investors.

HDFC is India's largest private sector bank by assets and the world's 10th largest bank by market capitalization as of April 2021.