Overseas loans get cheaper for India banks

Bloomberg

India’s banks are getting syndicated loans at razor-thin interest rates from international lenders amid signs the country is moving towards cleaning up $210 billion of non-performing assets.
Axis Bank Ltd, IndusInd Bank Ltd, State Bank of India and Yes Bank Ltd are among those reaping the benefits of cheaper funds as confidence in the world’s fastest-growing major economy increases. Indian banks have raised 77 percent more in foreign-currency loans this year than in the same period of 2017, even as such lending overall to all Indian bor-
rowers slumped, according to data compiled by Bloomberg.
Indian banks will have cleaner balance sheets and stronger credit profiles in the long run as a result of the central bank’s multi-year push to recognise problem assets more accurately, Moody’s Investors Service said in a report this month. The country’s economic growth increased 7.2 percent in the October-December quarter, the quickest in more than a year.
“There is good demand for high-quality loans from Indian banks
as the sovereign macro story remains strong,” said Manmohan Singh, head of banking at the Indian unit of Bank of Nova Scotia. “International investors and lenders are
taking comfort from the Insolvency and Bankruptcy Code, which is working well.”
India’s bankruptcy courts are dealing with the nation’s 40 largest bad loan accounts, whose resolution is key for local lenders to clean up their books.
Strengthening sentiment has increased access to the offshore loan markets for investment-grade domestic lenders. That stands in contrast to a broader slump in lending in dollars, euro and yen to banks in the Asia-Pacific region excluding Japan, as such loans fell 16 percent in 2018 compared with the same period last year.
After raising the country’s sovereign rating in November for the first time in 14 years, Moody’s also upgraded three lenders including State Bank of India and Indian Railway Finance Corp., the funding unit of the state-owned rail network.
State Bank is seeking a new $750 million borrowing, after getting $2 billion of syndicated loans last year. The nation’s largest lender paid a margin of 105 basis points a five-year borrowing signed in September, five basis points less than facilities in October 2016 and December 2015.
“Pricing on Indian offshore loans seems to have bottomed out,” said Mumbai-based Singh at Scotiabank. Underwriters and borrowers need to be “watchful” as there may be resistance from participating lenders at current levels, he said.
IndusInd Bank’s $500 million loan signed last month pays a margin of 80 basis points over Libor, 10 basis points lower than a comparable
facility in August.