Banks accelerate offshore bond funding
Banks have raised about $4 billion through international bond markets this year, as cheaper hedging, strong investor demand and expanding foreign-currency business revive offshore borrowing after years of relatively subdued issuance.
HDFC Bank, ICICI Bank, Axis Bank and State Bank of India have been among the principal issuers, while another group of lenders is preparing deals that could keep the fundraising cycle active through the remainder of 2026. The rush has broadened from large banks to lenders making their first appearances, or returning after lengthy absences, in the international debt market.
The revival has been driven largely by a Reserve Bank of India initiative introduced in June that sharply reduced the cost of hedging qualifying overseas borrowings. The facility allows eligible foreign-currency borrowings with minimum maturities of three years to be swapped at a fixed annual rate of 1.5 per cent, reducing one of the biggest disadvantages banks face when raising dollars abroad.
HDFC Bank was among the first major beneficiaries, raising $750 million through five-year senior unsecured bonds issued through its International Financial Services Centre banking unit at GIFT City. The securities carry a coupon of 5.067 per cent and mature in June 2031.
Axis Bank followed with an $800 million dual-tranche transaction. It sold $500 million of perpetual Additional Tier 1 capital notes carrying a 6.875 per cent coupon and $300 million of five-year senior unsecured notes paying 5.348 per cent. The senior securities mature in June 2031.
ICICI Bank has emerged as one of the most active borrowers. After returning to the public dollar market in July with a $1 billion five-year issue — its first such benchmark transaction since 2017 — the lender raised another $750 million in August. The second transaction was priced at 105 basis points above the five-year US Treasury yield after investor demand exceeded $2.2 billion.
State Bank of India has also stepped up overseas fundraising. The lender raised $600 million through a private placement of three-year dollar bonds after postponing an earlier planned public transaction when heavy supply pushed borrowing costs higher. It subsequently returned to the public market with plans for at least $500 million of five-year bonds through its London branch, with bankers expecting the eventual size to potentially reach $1 billion.
The next phase is likely to involve a wider pool of borrowers. Kotak Mahindra Bank, YES Bank, IDFC First Bank and Federal Bank have accelerated plans to raise a combined $1.85 billion through dollar bonds with maturities of up to five years. Kotak is entering the international bond market for the first time, while YES Bank is returning after the restructuring that followed its 2020 crisis.
Their plans have gained urgency after the central bank brought forward the closing date for a separate zero-cost foreign-exchange swap facility covering Foreign Currency Non-Resident deposits to August 31 from September 30. The measure had attracted $52.3 billion in such deposits between June and mid-August, prompting the earlier closure. Other concessional windows covering external commercial borrowings and overseas foreign-currency borrowings remain available until the end of December.
Banks have sought foreign-currency liabilities partly to support lending and deposit businesses linked to overseas customers while diversifying funding beyond domestic deposits. International issuance can also broaden the institutional investor base, particularly among global asset managers, pension funds and banks seeking investment-grade Asian credit.
Pricing remains sensitive to US Treasury yields and the volume of simultaneous supply. SBI had delayed a planned $1 billion deal in June when competing issuance increased borrowing costs, illustrating how an overcrowded calendar can erode some of the advantage provided by cheaper hedging.
That constraint has not halted the broader expansion. Overseas fundraising by banks reached about $6.3 billion after the central bank's June measures, compared with roughly $850 million earlier in the year, while lenders were preparing billions of dollars of additional bond and loan transactions before the end-August deposit-swap deadline.
HDFC Bank, ICICI Bank, Axis Bank and State Bank of India have been among the principal issuers, while another group of lenders is preparing deals that could keep the fundraising cycle active through the remainder of 2026. The rush has broadened from large banks to lenders making their first appearances, or returning after lengthy absences, in the international debt market.
The revival has been driven largely by a Reserve Bank of India initiative introduced in June that sharply reduced the cost of hedging qualifying overseas borrowings. The facility allows eligible foreign-currency borrowings with minimum maturities of three years to be swapped at a fixed annual rate of 1.5 per cent, reducing one of the biggest disadvantages banks face when raising dollars abroad.
HDFC Bank was among the first major beneficiaries, raising $750 million through five-year senior unsecured bonds issued through its International Financial Services Centre banking unit at GIFT City. The securities carry a coupon of 5.067 per cent and mature in June 2031.
Axis Bank followed with an $800 million dual-tranche transaction. It sold $500 million of perpetual Additional Tier 1 capital notes carrying a 6.875 per cent coupon and $300 million of five-year senior unsecured notes paying 5.348 per cent. The senior securities mature in June 2031.
ICICI Bank has emerged as one of the most active borrowers. After returning to the public dollar market in July with a $1 billion five-year issue — its first such benchmark transaction since 2017 — the lender raised another $750 million in August. The second transaction was priced at 105 basis points above the five-year US Treasury yield after investor demand exceeded $2.2 billion.
State Bank of India has also stepped up overseas fundraising. The lender raised $600 million through a private placement of three-year dollar bonds after postponing an earlier planned public transaction when heavy supply pushed borrowing costs higher. It subsequently returned to the public market with plans for at least $500 million of five-year bonds through its London branch, with bankers expecting the eventual size to potentially reach $1 billion.
The next phase is likely to involve a wider pool of borrowers. Kotak Mahindra Bank, YES Bank, IDFC First Bank and Federal Bank have accelerated plans to raise a combined $1.85 billion through dollar bonds with maturities of up to five years. Kotak is entering the international bond market for the first time, while YES Bank is returning after the restructuring that followed its 2020 crisis.
Their plans have gained urgency after the central bank brought forward the closing date for a separate zero-cost foreign-exchange swap facility covering Foreign Currency Non-Resident deposits to August 31 from September 30. The measure had attracted $52.3 billion in such deposits between June and mid-August, prompting the earlier closure. Other concessional windows covering external commercial borrowings and overseas foreign-currency borrowings remain available until the end of December.
Banks have sought foreign-currency liabilities partly to support lending and deposit businesses linked to overseas customers while diversifying funding beyond domestic deposits. International issuance can also broaden the institutional investor base, particularly among global asset managers, pension funds and banks seeking investment-grade Asian credit.
Pricing remains sensitive to US Treasury yields and the volume of simultaneous supply. SBI had delayed a planned $1 billion deal in June when competing issuance increased borrowing costs, illustrating how an overcrowded calendar can erode some of the advantage provided by cheaper hedging.
That constraint has not halted the broader expansion. Overseas fundraising by banks reached about $6.3 billion after the central bank's June measures, compared with roughly $850 million earlier in the year, while lenders were preparing billions of dollars of additional bond and loan transactions before the end-August deposit-swap deadline.