Union Bank of India has returned to the international dollar debt market after a 12-year break, raising $600 million through a public sale of U.S. dollar-denominated bonds.
The move marks a significant fundraising step for one of India’s major state-owned banks as lenders across the country increasingly look to overseas markets for cheaper sources of funding.
The bank raised the money through its Dubai branch. According to Reuters, the $600 million was divided equally between two bond issues, with $300 million raised through three-year bonds and another $300 million through five-year bonds.
The three-year bonds carry a coupon rate of 5.23%, while the five-year bonds have a coupon rate of 5.417%.
The pricing of the bonds was also seen as an important development for the bank. The three-year notes were priced at 93 basis points above U.S. Treasury bonds, while the five-year notes were priced at 102 basis points above Treasuries. This was lower than the initial guidance given to investors, suggesting that demand for the bonds was strong.
Union Bank of India’s return to the market comes at a time when several Indian lenders are rushing to raise funds in U.S. dollars.
The Reserve Bank of India recently introduced a discounted hedging facility that made overseas dollar fundraising more attractive for financial institutions. However, the central bank later announced that the window for hedging certain non-resident deposits would close on August 31, earlier than initially expected.
The approaching deadline has created a rush among Indian banks to complete their overseas borrowing plans.
Union Bank of India is now the third state-run Indian bank to access the public dollar debt market since June. State Bank of India and Bank of Baroda have also raised funds through similar public bond sales, while other lenders have used private placements to secure additional financing.
The wider trend shows how important international borrowing has become for Indian banks.
Between June and August, Indian lenders raised approximately $11.25 billion through bond issuances, according to Reuters. The money raised is largely connected to efforts by banks to support customers using the Reserve Bank of India’s discounted dollar deposit scheme.
For Union Bank of India, the successful fundraising represents a major return to the global debt market.
The bank had not made a public dollar bond sale for more than 12 years. Its decision to return now reflects the growing opportunity created by India’s recent financial policies and the strong demand for international funding among banks.
International bonds allow banks to access investors outside their home countries. This can help financial institutions diversify their sources of funding instead of depending entirely on domestic deposits and local borrowing.
However, borrowing in foreign currencies also comes with risks.
Banks must carefully manage changes in exchange rates because a stronger U.S. dollar can make foreign debt more expensive to repay. This is one reason why hedging arrangements are important when banks raise funds in another currency.
The recent wave of dollar fundraising by Indian banks is expected to remain a major development in the country’s financial sector in the coming days.
With the Reserve Bank of India’s hedging window approaching its deadline, other lenders may continue trying to complete their international borrowing plans before the end of August.
For now, Union Bank of India’s $600 million bond sale shows that international investors are still willing to support Indian financial institutions.
The success of the deal could also encourage other banks to explore global markets as they search for new ways to raise funds, strengthen liquidity and support future lending activities.
