State Bank of India (SBI) has announced the completion of a $1 billion Syndicated Social Loan Facility. This syndicated transaction is significant for SBI and the Indian ESG financing market since it is the largest ESG loan by a commercial bank in the Asia Pacific and the second-largest social loan globally. Additionally, this is the bank’s inaugural social loan and the first syndicated loan in the past five years .
The $1 billion facility was arranged through MLABs, MUFG Bank, and Taipei Fubon Commercial Bank Co. Ltd. MUFG and Taipei Fubon Commercial Bank are Joint Social Loan Coordinators while MUFG is the Lead Social Loan Coordinator for this transaction.
Dinesh Khara, Chairman, SBI said, “As a responsible and sustainable organization, we are committed to conducting our business operations with the highest standards of Environmental, Social, and Governance (ESG) practices. Issuance of our first social loan is an embodiment of our commitment to ESG driven by our belief that our long-term success depends not only on our financial performance but also on our ability to make a positive impact on the environment, on society, and on our stakeholders.”
What is syndicated social loan facility?
A syndicated loan, also known as a syndicated bank facility, is financing offered by a group of lenders – referred to as a syndicate – who work together to provide funds for a single borrower. The borrower can be a corporation, a large project, or a sovereign government. The loan can involve a fixed amount of funds, a credit line, or a combination of the two.
Syndicated loans arise when a project requires too large a loan for a single lender or when a project needs a specialized lender with expertise in a specific asset class. Syndicating the loan allows lenders to spread risk and take part in financial opportunities that may be too large for their individual capital base. Interest rates on this type of loan can be fixed or floating, based on a benchmark rate such as the London Interbank Offered Rate (LIBOR). LIBOR is an average of the interest rates that major global banks borrow from each other.
Syndicated loans are usually too large for a single lender to handle. For example, the Chinese corporation Tencent Holdings Ltd., the biggest internet company in Asia and owner of popular messaging services WeChat and QQ, signed a syndicated loan deal on March 24, 2017, to raise $4.65 billion.
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