Swap deals may hit SBI bottomline

MUMBAI, JAN 30: State Bank of India’s bottomline is likely to be affected considerably due to the high cost dollar-rupee swap it has entered with the Reserve Bank of India during this week. According to market estimates dollars in the range of $400-$700 million was swapped by SBI with RBI to overcome the severe liquidity crisis in the money market. The swap cost — forward premia plus the interest the dollar fund would have earned abroad — is in the range of 20-25 per cent. Most of the swaps were done for three and six-month period, said sources. This would effectively mean that SBI is paying 20-25 per cent for six month money. The other major players who entered into swap with RBI are the foreign banks. Many public sector banks like BoB a and BoI have stayed away from the RBI offer of swap because of the high cost involved, admitted officials of BoB and BoI.