Bank of Baroda (BoB) is planning to raise $500 million via an overseas loan as it seeks to expand its offshore investments and credit, as per ET. It reached global lenders who would make commitments by 10th October depending on the Global Credit Markets, caught in a storm. The likely five-year loan is priced after adding a markup or spread of 140-160 basis points over the Secured Overnight Financing Rate (SOFR).

At least three foreign banks from Europe and Asia are in the development stage to participate in placing the loan, having a base size of $300 million and the option to retain subscriptions up to $500 million. The bank witnesses opportunities to increase its balance sheet size offshore. It has a presence in the US, the UK, Singapore, Dubai, and Nigeria, among other countries.

While BoB functions through a New York-based branch in the US, it has subsidiaries, including Bank of Baroda (Uganda), Bank of Baroda (UK), and Bank of Baroda (Kenya), extending loans and deposits in those foreign lands. Bank of Baroda (UK) has a 20% YoY jump in the investment book to Rs 3,172 crore in the 2022 June quarter. Gross loans grew nearly 25% YoY to Rs 2,083 crore in the first quarter for BoB (Uganda).

Being familiar with the local companies, they have traditionally done business with them, leading to a mutual understanding of the financials and future outlook, which is not the case for international investors. This paves the way for lenders like BoB to earn higher yields in dollar terms. The bank is counted among the top Indian lenders with a global presence. Simultaneously, Indian companies can also obtain loans overseas from domestic lenders. In both cases, covering currency risk doesn’t rise, known as a “natural hedge”, adding to the cost advantage.