Why are banks rushing to raise billions of dollars through overseas bonds?
India’s top private sector as well as state-owned banks have tapped overseas markets to raise funds via US dollar bonds, taking advantage of the special concessionary forex swap window announced by the RBI in June
- Aug 25, 2026,
- Updated Aug 25, 2026 6:06 PM IST
ICICI Bank, the second-largest private-sector lender in the country, on August 24 raised $1 billion through senior unsecured fixed-rate notes issued by its banking unit in the International Financial Services Centre in GIFT City. This fund raise was in addition to the $750 million that the lender had raised through a similar route just a few days earlier on August 18. Larger rival HDFC Bank on August 20 announced a $1.75 billion fund raise through a dollar bond issue, also from its GIFT City branch. In total, ICICI Bank has raised $3 billion in overseas funding in the last few months. HDFC Bank has raised around $2.5 billion. The two banks are not alone. Kotak Mahindra Bank raised $650 million via US dollar bonds last week. Several other private sector and state-owned banks have raised funds via dollar bond issues. On August 25, public sector lender Union Bank announced a $600 million fund raise via its branch in Dubai International Financial Centre. This, reportedly, was its first such bond issuance in almost 12 years. India’s largest lender State Bank of India had raised $500 million via senior unsecured fixed notes on August 11. These bonds issued by various banks have maturity periods of either 3 or 5 years with coupon rates between 5.0-5.5 per cent.
MUST READ: Did you know India’s cash demand is strong despite the digital payment boom? Why Now?
On June 8, 2026, the Reserve Bank of India had announced a special foreign exchange swap facility for funds raised via FCNR (B) (foreign currency non-resident bank) deposits, overseas foreign currency borrowings (OFCB) and external commercial borrowings (ECB). During the swap window, entities could raise dollars overseas and then swap them with the RBI to get equivalent rupees in return at a concessional rate, which are then converted back to dollars at the end of the swap period. The RBI would even bear the hedging costs. This special window had been launched to shore up the country’s foreign exchange reserves in the backdrop of the war in West Asia that led to a surge in energy prices in turn raising India’s import bill. The rupee had been under huge pressure too. Banks have rushed to take advantage of this special window and are therefore rushing to raise funds overseas before the window closes.
MUST READ: Why RBI closed FCNR(B) window early despite ruling it out two weeks earlier Strong Response The swap window announced by RBI has seen a huge response with close to $73 billion raised in just 11 weeks, marking the fastest and largest such forex mobilization undertaken by the country. As of August 22, around $65.4 billion had been raised via FCNR (B) deposits alone. OFCBs accounted for around $4.9 billion and ECBs around $2.59 billion. The inflows into FCNR (B) deposits this time around are significantly more than the $26 billion that was raised through a similar forex swap window that was announced back in 2013. Changing dynamics The flow has been such that the central bank had to announce an early closure of the special window for FCNR (B) deposits. As per original plan, the window was supposed to remain open till September 30 and the swap facility was to be available till October 16. The FCNR (B) window now closes on August 31. However, the window for ECBs and OFCBs will remain open till December 31, 2026. With the FCNR (B) window being shut early, banks have rushed to tap the OFCB and ECB market.
How the fund raising helps banks The forex fund raise serves multiple purposes. One, the large banks, which have sizeable foreign operations, need forex to support these branches. The banks can lend dollars to importers who need them too. Importantly, the special concessionary swap window reduces the cost of overseas funding for banks, especially with the central bank absorbing the hedging cost. The RBI absorbing hedging costs also helped banks offer higher interest rates on FCNR (B) deposits and hence perhaps the huge inflows that have been seen this time. For some time now, bank deposit growth has lagged credit growth in the domestic market. So, the overseas fund raising now can also help banks fund the strong demand for credit. It not only allows diversification, but also reduces the pressure on domestic deposit raising.
ICICI Bank, the second-largest private-sector lender in the country, on August 24 raised $1 billion through senior unsecured fixed-rate notes issued by its banking unit in the International Financial Services Centre in GIFT City. This fund raise was in addition to the $750 million that the lender had raised through a similar route just a few days earlier on August 18. Larger rival HDFC Bank on August 20 announced a $1.75 billion fund raise through a dollar bond issue, also from its GIFT City branch. In total, ICICI Bank has raised $3 billion in overseas funding in the last few months. HDFC Bank has raised around $2.5 billion. The two banks are not alone. Kotak Mahindra Bank raised $650 million via US dollar bonds last week. Several other private sector and state-owned banks have raised funds via dollar bond issues. On August 25, public sector lender Union Bank announced a $600 million fund raise via its branch in Dubai International Financial Centre. This, reportedly, was its first such bond issuance in almost 12 years. India’s largest lender State Bank of India had raised $500 million via senior unsecured fixed notes on August 11. These bonds issued by various banks have maturity periods of either 3 or 5 years with coupon rates between 5.0-5.5 per cent.
MUST READ: Did you know India’s cash demand is strong despite the digital payment boom? Why Now?
On June 8, 2026, the Reserve Bank of India had announced a special foreign exchange swap facility for funds raised via FCNR (B) (foreign currency non-resident bank) deposits, overseas foreign currency borrowings (OFCB) and external commercial borrowings (ECB). During the swap window, entities could raise dollars overseas and then swap them with the RBI to get equivalent rupees in return at a concessional rate, which are then converted back to dollars at the end of the swap period. The RBI would even bear the hedging costs. This special window had been launched to shore up the country’s foreign exchange reserves in the backdrop of the war in West Asia that led to a surge in energy prices in turn raising India’s import bill. The rupee had been under huge pressure too. Banks have rushed to take advantage of this special window and are therefore rushing to raise funds overseas before the window closes.
MUST READ: Why RBI closed FCNR(B) window early despite ruling it out two weeks earlier Strong Response The swap window announced by RBI has seen a huge response with close to $73 billion raised in just 11 weeks, marking the fastest and largest such forex mobilization undertaken by the country. As of August 22, around $65.4 billion had been raised via FCNR (B) deposits alone. OFCBs accounted for around $4.9 billion and ECBs around $2.59 billion. The inflows into FCNR (B) deposits this time around are significantly more than the $26 billion that was raised through a similar forex swap window that was announced back in 2013. Changing dynamics The flow has been such that the central bank had to announce an early closure of the special window for FCNR (B) deposits. As per original plan, the window was supposed to remain open till September 30 and the swap facility was to be available till October 16. The FCNR (B) window now closes on August 31. However, the window for ECBs and OFCBs will remain open till December 31, 2026. With the FCNR (B) window being shut early, banks have rushed to tap the OFCB and ECB market.
How the fund raising helps banks The forex fund raise serves multiple purposes. One, the large banks, which have sizeable foreign operations, need forex to support these branches. The banks can lend dollars to importers who need them too. Importantly, the special concessionary swap window reduces the cost of overseas funding for banks, especially with the central bank absorbing the hedging cost. The RBI absorbing hedging costs also helped banks offer higher interest rates on FCNR (B) deposits and hence perhaps the huge inflows that have been seen this time. For some time now, bank deposit growth has lagged credit growth in the domestic market. So, the overseas fund raising now can also help banks fund the strong demand for credit. It not only allows diversification, but also reduces the pressure on domestic deposit raising.