Big banks to tap forex loan market

Banks have once again queued up to raise short-term dollar loans to fund their export credit busineses. Currently, the banks in the loop are the State Bank of India (SBI), Bank of Baroda (BoB), Bank of India (BoI) and Union Bank of India with plans to raise $250 million, $125 million, $100 million and $50 million respectively.

While BoB and SBI have given the mandate to Citibank for the fund-raising plan, Standard Chartered Bank (StanChart) is the lead arranger for Union Bank. BoI’s fund-raising exercise is arranged by both StanChart and Credit Lyonnais. Investment banking sources added that Oriental Bank of Commerce is also contemplating a similar exercise.

There is an increasing demand for dollar loans with the cash-dollar shortage in the banking system prevailing for over an year, and also due to the typical high demand for pre-shipment credit foreign currency (PCFC) loans. The dollar loans banks are raising are typically short-term loans with 364-days maturity to fund their short-term credit business.The cash-dollar shortage has compelled banks to go for raising short-term dollar-loans through the syndicated loan market. The cause for being in the market for fund-raising is the immediate needs of dollar funds, bankers pointed out.