MTN is a route that used debt channel to provide a regular cash flow. These notes have a life span of five -10 years. Currently, a large number of banks are opting for MTN, as it helps them too fund their overseas requirement as well as get to take advantage of the favorable interest rates abroad.
The five-year US govt. bonds yields around 1.87% and MTN route has become quite popular in Indian market that every company is opting for it to maintain a constant cash flow. While any Indian banks like Bank of India and Indian Overseas Bank are already set to invest in MTN plans, other banks like Syndicate Bank and IDBI Bank have also announced their interest in MTN plans to cater to the needs of Indian companies for foreign currency funds. RBI has raised policy rates to 275 basis points since March 2010, which has further resulted in expensive funds in India