At least four Indian public-sector and private lenders are deferring their plans to tap the US dollar debt market as a recent spike in Treasury yields and hedging costs has made overseas borrowing expensive, Reuters reported, citing bank officials and merchant bankers.

Source: Reuters via The Hindu BusinessLine

Canara Bank, Punjab National Bank (PNB) and Bank of India had plans to raise as much as $2.5 billion — yaani roughly Rs 23,800 crore — through dollar debt under the Reserve Bank of India's subsidised hedging facility, Reuters reported. They had initiated talks but decided not to go ahead, the bankers said, speaking on condition of anonymity as they are not authorised to speak to the media. Private lender Karur Vysya Bank also considered a dollar issue and decided to wait, Flash Finance reported.

Source: Reuters via TradingView

The 10-year US Treasury yield has climbed 25 basis points to around 5 per cent in the last two months, while the rupee has declined 0.8 per cent in the same period, Reuters reported. Bankers said the all-in dollar debt cost for a state-run lender would currently be around 70 to 100 basis points over one-year rupee funding.

Source: The Hindu BusinessLine

Canara Bank MD and CEO Brajesh Kumar Singh told Reuters the bank had decided not to proceed with the planned dollar bond sale as rates had risen quite sharply. Punjab National Bank and Bank of India did not reply to Reuters' emails seeking comment, the report said.

Source: Reuters via TradingView

The deferral comes even though the RBI's concessional hedging facility, opened in June for banks and public-sector enterprises tapping overseas debt, is scheduled to lapse at the end of December, Flash Finance reported. Until pricing improves, the lenders are expected to rely more on rupee funding.

Source: Flash Finance