Three Indian DFIs Plan To Raise At Least $1.5 Billion Via Foreign Currency Loans For Cheaper Funding: Sources
Three Indian development finance institutions, NABARD, SIDBI, and NaBFID, are planning to raise at least $1.5 billion through foreign-currency bank loans. According to sources, the institutions are favoring loans over debut dollar bonds because the process is simpler.
- Republic Business
- 2 min read
Three Indian development finance institutions are planning to raise at least $1.5 billion through foreign-currency bank loans under the central bank's discounted overseas borrowing facility, three people familiar with the plans said.
The institutions are favouring loans over bonds because none has issued dollar debt before and the process is simpler, the sources added.
The National Bank for Agriculture and Rural Development (NABARD), the Small Industries Development Bank of India (SIDBI) and the National Bank for Financing Infrastructure and Development (NaBFID) are each seeking to raise at least $500 million through foreign-currency loans, with NaBFID the furthest along after initiating talks with lenders, an executive confirmed.
"We expect to raise up to $2 billion via ECBs in this financial year. At present, we are planning to raise $500 million through the ECB route, and we have already started our activity and are exploring in the market," NaBFID managing director Rajkiran Rai told Reuters.
"With the RBI window opening, ECBs work out much cheaper. For the loan, the landed cost could be in the range of 6.5%-7.0%, NaBFID's Rai added.
The institution had also raised $125 million via a smaller dollar loan tranche in March, the sources added.
The sources declined to be identified as they are not authorised to speak to the media. NABARD and SIDBI did not respond to Reuters' requests for comment.
NABARD and SIDBI, which have not yet tapped foreign funding, have initiated preliminary talks and could approach the market over the next 30 to 40 days, according to all the sources.
"There is a lengthy procedure involved in a debut dollar bond sale, and it is time-consuming. If an institution is not going to be a regular issuer like EXIM Bank, it makes little sense to choose bonds over loans," one of the sources said.
Based on the credit ratings, dollar loans may be just marginally expensive than bonds for now.
The Reserve Bank of India earlier this month allowed banks and state-run companies raising funds overseas to access a subsidised hedging facility, lowering the cost of managing currency risk as part of a broader effort to attract dollar inflows and support the rupee.
Since then, HDFC Bank, Axis Bank and Power Finance Corp have raised a combined $1.85 billion through dollar bonds, while Bank of Baroda and State Bank of India are preparing for similar issues.
Published By : Shourya Jha
Published On: 25 June 2026 at 17:27 IST