India’s largest lender by assets raised $500 million on Tuesday through five-year senior unsecured fixed-rate notes, carrying a coupon of 4.5% payable semi-annually, according to a stock exchange filing. Given that the five-year US Treasury was at 3.74%, the spread over it would be around 75 basis points.
“SBI’s issuance at just 75 basis points over US Treasuries sets a new yardstick for Indian borrowers in the global markets,” said Vineet Agrawal, co-founder of Jiraaf, an online bond platform provider. “This is the tightest spread ever achieved by an Indian issuer, reflecting global investors’ trust in the resilience of India’s debt markets.”
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The fundraise follows S&P’s upgrade of India’s sovereign and SBI’s rating from BBB- to BBB. It defies the slowdown in overseas bond issuances by Indian corporates. Data by Prime Database showed that in FY25, Indian companies floated 50 overseas bond issues worth $7.1 billion. In comparison, in FY26 till August, there have been only four such issuances, mobilizing $372 million.
SBI had last tapped the dollar bond market in November 2024. The bank at the time raised $500 million through five-year dollar bonds at a yield of 5.13%, or a spread of 82 bps over the US Treasuries of similar maturity, Reuters reported on Tuesday. It was also the tightest spread achieved by the lender at the time, according to bankers.
Turning point
“SBI’s aggressive pricing achievement could prove to be a turning point,” said Venkatakrishnan Srinivasan, founder and managing partner of financial advisory firm Rockfort Fincap LLP. Other large Indian entities especially those with global businesses or natural dollar revenues—may now revisit the offshore market, encouraged by SBI’s success.
However, Srinivasan cautioned that international bond markets remain jittery, with emerging market borrowers facing wider spreads amid geopolitical uncertainties, volatile US Treasury yields, and heightened currency risks. “A sustained revival will likely need global volatility to ease and EM spreads to compress.”
“Onshore, rising local yields—driven by the RBI’s neutral stance, fear of additional government borrowing linked to GST reforms though the yields are coming down slowly, tariff adjustments, and the rupee’s weakness—have also made issuers pause before tapping overseas markets,” he said.
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He said the cost of currency hedging and India’s withholding tax on interest payments have further blunted the benefits of offshore bonds, particularly for issuers without natural dollar revenues.
Agrawal of Jiraaf, however, said the oversubscription of the SBI’s issue highlights confidence in India’s medium-to long-term growth prospects, especially following the sovereign rating upgrade. “Indian institutions can access overseas capital at world-class pricing, which is likely to encourage more banks and corporates to raise funds abroad.”
India’s stable position
According to CreditSights, a Fitch group company, the initial price guidance for the dollar-bond issue was set at a tight 105 basis points (bps) over US Treasuries, with fair value seen closer to 80 bps, implying a potential tightening of 25 bps.
The record-low spread also showed how global investors are “voting with their wallets on India’s growth story”, Agrawal said. Strong demand allowed the final pricing to tighten sharply from initial guidance, reinforcing India’s position as a stable investment destination, he said.
SBI chairman Challa Sreenivasulu Setty said the tight pricing reflects the reduction in the borrowing cost for Indian issuers following the improvement in the credit profile and sovereign rating upgrade. Citigroup, HSBC, J.P. Morgan, MUFG, SMBC Nikko and Standard Chartered Bank were the joint bookrunners for the transaction.
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The recent upgrade of India’s sovereign bond rating and the corresponding uplift in ratings for several banks have already improved overseas borrowing costs, according to Sachin Sachedva, vice president, sector head-financial sector ratings at Icra Ltd.
Sachdeva said that spreads need to be interpreted in the context of the interest rate cycle. “Fixed-rate bonds in a declining rate cycle are expected to command a lower spread compared to spreads in a rising rate cycle,” he said, adding that floating-rate structures are likely to see higher spreads in such an environment as investors weigh the absolute decline in future cash flows.
