A surge in dollar demand from Indian lenders racing to boost the leverage on foreign currency deposits they are offering to overseas citizens is firing up its dollar bond and loan markets, with global banks rushing to capture the business, according to people familiar with the matter.
Mitsubishi UFJ Financial Group and Standard Chartered Plc are working to secure some of the deals for both dollar bonds and loans, executives from the companies said. Other global banks including Citigroup Inc., HSBC Holdings Plc and Barclays Plc are also in active discussions with local financiers to arrange their dollar debt raising plans, said the people who asked not to be identified discussing private matters.
The flurry of fund raising will help Indian banks raise as much as $30 billion through offshore loans for the rest of 2026, the people said. That would add to the $12.7 billion that have been secured so far, potentially raising the year's total to a record at nearly $43 billion.
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Separately, Indian banks and state-run financiers are expected to raise up to $10 billion from the global bond market for the remainder of the year, according to MUFG. That would be on top of the $10.8 billion raised so far, a five-year high, according to data compiled by Bloomberg.
| Foreign lenders who generally run significant large dollar balance sheets and want to increase their exposure to India are in pole position to provide the funding or help arrange bond sales. Representatives for Barclays and Citigroup declined to comment. HSBC didn't immediately reply to a request for comment. Central Bank DriveThe latest measures by the Reserve Bank of India to increase foreign inflows "have revived the dollar debt market with a slew of borrowers approaching foreign banks for dollar debt raising," said Shashank Joshi, deputy chief executive officer at MUFG Bank in India. "The pipeline for dollar bonds and loans are pretty strong, likely hitting record sums in 2026." The rush to secure dollars among lenders follows the central bank's campaign to attract capital from around 35 million non-resident Indians across the world to support its currency and replenish its foreign-exchange reserves. Banks are giving interest rates north of 7% for those dollars which would end on Sept. 30. The RBI has allowed them to lend to clients against their deposits with some banks offering loans of up to 19 times the original deposit. Under another special borrowing facility for banks and state-run firms, the RBI is also providing a concessional foreign exchange swap scheme that reduces the hedging costs of overseas borrowings, fueling the dash. This window is due to end by Dec. 31. "A significant portion of foreign currency funding will likely occur via the loan route," said Prathamesh Sahasrabudhe, managing director and head of capital markets for India and South Asia at Standard Chartered Bank, adding that issuing dollar bonds usually take longer. Such is the rush that Indian lenders including HDFC Bank Ltd., Axis Bank Ltd., State Bank of India and Power Finance Corp. comprised 40% - or $4.2 billion - of the dollar bond sales in the past two months, data compiled by Bloomberg show. Local lender Punjab National Bank has approved a plan to raise up to $1.5 billion through overseas debt with Bank of Baroda also considering a fundraising through foreign currency bonds. Union Bank of India will raise up to $2 billion in foreign currency funds through a medium term note program at its Dubai and/or Sydney branches. Other banks are in discussions with foreign banks for bilateral loans while State Bank of India is raising a loan of about $500 million from two institutions, the people said. A representative for State Bank of India didn't immediately respond to a request seeking comment. |
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