SBI to raise $5 billion through offshore loans

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SBI to raise $5 bn through offshore loans
The largest bank in the country, State Bank of India, said on Friday that it plans to raise $5 billion through offshore loans by December.

Pratip Chaudhury, SBI chairman told reporters, “We hope to raise $5 billion debt by December by means of foreign debt through medium-term notes (MTN)."

He said the debt would be raised during the second or the third quarter of this fiscal.

"Right now, we have a total objective of $5 billion but we would like to time the market," Chaudhry said. "First there has to be visibility of credit growth. If there is demand for assets we will go and raise it."

MTN is a category of bond note that has a maturity period between 5 to 10 years that is continually offered through various brokers.

Chaudhry said, the bank is confident of maintaining its net interest margin (NIM) at 3.5% in this fiscal. NIM measures the return on a company's investments relative to its interest expenses.

“The margins are improving. For our current fiscal the NIM guidance is 3.5% and we are slightly ahead of it,"Chaudhury said. "Overall guidance is 3.5 per cent and we are on track."

Commenting on credit growth SBI chief said the bank is also looking at increasing its credit by 16-19% in FY12. On recent interest rate hikes, Chaudhury said: "Raising of interest rate has not impacted interest margin."

On Thursday, the national bank had increased lending rates by 25 basis points, meanwhile deposit rates were increased by 100 basis points. This move will make home, auto and other loans more expensive, although the move will provide better returns to savers.

The revised base rate will be implemented from July 11. This will make the lending rate to 9.50%. Even the new deposit rate of 9.25% with maturity period of 1-10 years will be implemented from July 11.

The benchmark prime lending rate (BPLR), used to determine floating interest rate loans has also been increased to 14.25%.

The decision came after RBI hiked its rate in its policy review. some of the major banks which includes private players like ICICI Bank, Canara Bank and Bank of Baroda, have also raised their lending rates.

On RBI's move to hike rates 10 times since March, 2010, Chaudhury responded: “Inflation is continuously above 7 per cent. So any policymaker would be worried."

Headline inflation stood at 9.06 per cent in May and is expected to breach the double-digit mark in July due to the recent hike in prices of diesel, cooking gas and kerosene.

OneIndia Money

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