State Bank of India (SBI), the largest lender in India, is planning to use $1.5 billion for its international operations over the next four months of the financial year. This includes $500 million raised through bonds (also called medium-term notes) and $1 billion through syndicated loans, which involve multiple banks coming together to provide funding.
Steady Growth in SBI’s International Business
SBI’s international business is growing at a fast pace. Customer credit, which refers to loans and other financial support provided to customers, increased from $66 billion in June 2024 to $70 billion in September—a $4 billion jump in just three months. According to SBI’s Deputy Managing Director of International Banking, Jayati Bansal, this strong growth is expected to continue, with a solid pipeline of deals planned for the rest of the financial year.
In Indian rupee terms, SBI’s total loans in its international business grew by 11.56% compared to the same period last year, reaching ₹5.88 trillion. The main drivers of this growth include loans through external commercial borrowings (ECBs), trade finance, and local credit provided in different international markets. The biggest contributors to this growth have been SBI branches in cities like New York, GIFT City (Gujarat), Hong Kong, Dubai (DIFC), and London.
SBI also has plans to disburse an additional $3–4 billion in international business in the coming months, with many proposals already in the pipeline.
Rising Demand for International Loans
Indian companies, including non-banking financial companies (NBFCs), are actively raising funds through external commercial borrowings (ECBs), which allow them to borrow money from foreign lenders. According to the Reserve Bank of India (RBI), Indian companies raised $4.84 billion through ECBs in September 2024 alone. Of this, $3.77 billion was raised through an automatic process that doesn’t require special approval, while $1.06 billion needed regulatory approval.
SBI is optimistic about this growing demand but remains cautious about risks. The bank is carefully evaluating the types of loans and risks associated with its international clients to ensure stability.
Efficient Fundraising Amid Lower Interest Rates
SBI recently raised $500 million through medium-term bonds at a competitive interest rate of 5.12%. This rate was calculated based on the current five-year US Treasury yield, with an added margin of just 82 basis points (0.82%). This is considered one of the best deals achieved by any Indian bank for a similar loan term. Initially, SBI had planned to price the bonds at a higher rate (115 basis points above the Treasury yield), but strong demand from investors allowed the bank to lower its borrowing cost by 33 basis points.
For comparison, bonds issued by SBI earlier in January 2024 had a higher margin of 117 basis points, which shows how market conditions have improved in favor of borrowers like SBI.
In addition, SBI raised another $1 billion through a syndicated loan arranged by HSBC, which had similar pricing terms as the bond issuance.
Why Interest Rates Are Dropping
Since January 2024, global interest rates have started to decline as the US Federal Reserve cut its policy rates twice. Lower interest rates reduce borrowing costs for banks and companies. This has helped SBI raise funds at lower costs and is expected to further benefit the bank in future fundraising efforts.
According to Bansal, macroeconomic conditions (like interest rates and market demand) play an important role in determining how much banks need to pay to borrow money. As the interest rate trend continues to soften, Indian banks, including SBI, are likely to secure even better terms for raising funds in the coming months.
What This Means for SBI
SBI is strategically using the current favorable conditions in the international market to expand its business and reduce borrowing costs. By raising funds efficiently and focusing on key international markets, the bank is positioning itself for strong growth while remaining cautious about risks. With its strong reputation and improved market conditions, SBI is well-prepared to take advantage of new opportunities in global banking.
