ICICI Bank targets $500m dollar bond via India's GIFT City
ICICI Bank is preparing a $500 million bond sale through its GIFT City branch, becoming the latest Indian lender to exploit a central bank policy that drastically reduces the cost of overseas borrowing.
ICICI Bank is preparing to raise at least $500 million through five-year US dollar bonds, marking the lender’s first such issuance in almost a decade. The bank plans to route the fundraising through its unit at GIFT City, India’s international financial services centre. An official announcement is expected this week, though ICICI Bank did not respond to requests for comment.
Proceeds from the sale will be directed toward client financing, offering leverage of up to nine times. "The proceeds will primarily be used to support client financing requirements, with the concessional swap making the economics significantly more favourable," a source said. The debt is expected to price tightly, likely between 90 and 95 basis points over US Treasuries.
Tapping central bank support
The issuance is being driven by a recent policy shift from the Reserve Bank of India. In June, the central bank introduced a concessional swap facility that allows banks and state-owned companies to hedge eligible external commercial borrowings at a fixed rate of 1.5% per annum, compounded semi-annually. This mechanism sharply reduces hedging costs, making overseas dollar borrowing far more attractive for domestic lenders.
ICICI is the latest major bank to capitalize on this window. HDFC Bank recently raised $750 million via similar five-year senior unsecured notes from its GIFT City branch, becoming the first Indian lender to utilize the facility. Those notes priced at 90 basis points over Treasuries to yield 5.067%, and Axis Bank is also tapping the programme.
Broader capital inflows
The broader market response to the central bank's scheme has been swift. Indian banks have collectively mobilised $20.7 billion under the special incentive window in just six weeks. FCNR(B) deposits account for the majority of the influx at $17.4 billion, followed by overseas foreign currency borrowings at $2 billion and external commercial borrowings at $1.3 billion.
This rapid accumulation of foreign capital serves a dual purpose for the domestic economy. It provides institutions with cheaper dollar funding to lend, while bolstering India's foreign exchange reserves. The scale of the current mobilisation evokes the central bank's 2013 intervention during the taper tantrum, when a similar facility ultimately attracted $34 billion.
