The Hindu Business Line : BoI to raise $350 m via medium term notes

BANK of India is expected to tap the foreign currency bond market through issuance of medium term notes (MTN) for raising the equivalent of $350 million.

Speaking to Business Line here, BoI's Executive Director, Mr P.L. Gairola, said this would be the first tranche and would be completed this year itself. The bank had announced earlier this year that it intended to raise at least $1 billion through MTNs.

MTNs are usually issued for tenors between 5 and 10 years. BoI's issue is a five-year note. Pricing for the five-year note is not yet finalised by the lead arrangers, Mr Gairola said.

The lead arrangers for the loan are Deutshe Bank, HSBC and Barclays Capital. But pricing is likely to be at a fine spread over the London Interbank offered rate (Libor), bankers said.

Estimates are that the pricing would be anywhere between 65 basis points and 70 basis points over Libor, they added.

In addition, there would also be an issue management fee that is usually about one per cent, bankers said.

Funds raised through the MTN issue, Mr Gairola said, would be used for expanding its overseas credit operations.

"We will deploy the resources wherever there is a positive carry," he said. This implied that the funds would be deployed in sectors where the spreads were positive to the bank. This, however, would not include the domestic credit markets. Deploying the resources in the international markets, he said, eliminated any possibility of exchange risks.

Enhancing presence

So far, BoI's external operations were confined to only trade finance, he said. The bank is looking for a greater presence in the international markets. Accordingly, BoI is looking for extending term credits to international borrowers.

As part of this expansion, BoI is looking for opening more international branches.

The bank currently has 20 branches and three representative offices. Mr Gairola said it intended to open an office in Beijing. In addition, it is also looking at upgrading its representative office in Shenzen in China into a full-fledged branch.

Further, he said, the representative office in Ho Chi Minh city would also be upgraded into a full-fledged branch.

Besides, Mr Gairola said the BoI had obtained permission from the Reserve Bank of India for opening a branch in Antwerp, Belgium, and a wholly owned subsidiary in Tanzania.

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