Bajaj Finance Seeks $500 Million Offshore Loan Amid Stricter Domestic Regulations

By siliconindia  |  Tuesday, 13 August 2024, 10:40:54 AM IST

Bajaj Finance Seeks $500 Million Offshore Loan Amid Stricter Domestic Regulations
Bajaj Finance Ltd., India’s largest non-banking finance company (NBFC) by market value, is in discussions to secure up to $500 million through an offshore loan, according to sources familiar with the matter. This move follows tighter regulations imposed by the Reserve Bank of India (RBI), which have limited domestic borrowing options for shadow financiers, prompting many to turn to global credit markets.
The Pune-based NBFC is reportedly negotiating the loan terms with a consortium of at least four foreign banks. The loan is expected to have a tenor of three to five years, with pricing linked to the Secured Overnight Financing Rate (SOFR), a widely used benchmark in Asia. The funds will be raised under the RBI’s external commercial borrowing (ECB) route, which restricts the interest rate to 500 basis points above the benchmark rate.
The decision to seek offshore funds comes as local shadow lenders face increased pressure following the RBI’s directive for banks to raise capital buffers for consumer loans, aimed at curbing risky lending practices. This regulatory change has made it more challenging for NBFCs to access traditional bank loans, pushing them towards international credit markets for funding.
Bajaj Finance is not alone in this trend. Other Indian shadow financiers, including gold loan providers Manappuram Finance Ltd. and Muthoot Finance Ltd., as well as Piramal Capital & Housing Finance Ltd., have also sought foreign loans this year. Additionally, HDB Financial Services Ltd., a subsidiary of India’s largest lender by market value, is currently in the process of raising foreign capital.
Bajaj Finance, a unit of one of India’s oldest conglomerates, Bajaj Group, primarily provides loans for purchasing two- and three-wheelers manufactured by its affiliate, Bajaj Auto Ltd., as well as consumer appliances. The company is also heavily involved in offering personal and mortgage loans.

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