Bank of Baroda, India’s second-largest public sector lender, is preparing to raise about $500 million through an issue of US dollar bonds as part of its $4 billion medium-term note programme, according to a document seen by Mint.
The bank has invited bids to appoint joint lead managers for the proposed issuance, signalling the start of the process to access overseas investors through a standalone Reg-S bond issue, which may be executed in one or more tranches, depending on market conditions, according to the document. Reg-S allows an issuer to sell bonds to non-US investors, primarily in Europe and Asia, without registering the offering in the US.
An email sent to the bank seeking further details on the bond issuance did not elicit a response until publishing time.
While the tenure, coupon and final pricing of the bonds will be determined closer to the launch, the proposed issuance is expected to be fully underwritten by then, with the appointed lead managers responsible for structuring, marketing, bookbuilding and pricing of the deal, the document showed.
Proceeds from the bond sale are likely to be used for general corporate purposes, including funding overseas operations and refinancing existing liabilities, in line with the bank’s broader foreign currency funding strategy, market participants said.
Bank of Baroda said it is updating its medium-term note programme based on its December 2025 financials, a prerequisite for proceeding with the offshore bond sale. The programme has a size of $4 billion, providing the bank flexibility to raise funds periodically from the global markets.
As part of the mandate, the joint lead managers will coordinate with international and domestic legal counsels and ratings companies, manage roadshows and investor meetings, and oversee the listing of the bonds on a recognized overseas exchange, such as the Singapore Exchange or GIFT City.
The bank has set 16 February as the deadline for submission of technical and financial bids, with technical proposals to be opened on 17 February and financial bids on 18 February, according to the document.
Turning overseas
Indian lenders turn to offshore bond markets to diversify funding sources, particularly amid tightening domestic liquidity conditions and rising credit demand. Bank of Baroda’s proposed dollar bond issue positions the lender to tap a broader global investor base once market conditions turn favourable.
“I don’t know whether they (Bank of Baroda) are raising funds because there is an opportunity overseas. Generally, when liquidity is tight in the domestic market, it opens a window for Indian banks to raise funds through bonds and lend via ECBs (external commercial borrowings) to Indian corporates,” said Anil Gupta, senior vice president and co-group head, financial sector ratings, at Icra.
In such situations, companies—whether NBFCs or others—looking to borrow for three to five years prefer the ECB market over the local market.
In the first half of FY26, Indian companies raised $18.49 billion in external commercial borrowings (ECBs), lower than $25.42 billion in the same period in FY26, according to Reserve Bank of India data. Some of the bigger borrowings were from Tata Capital ($400 million in January), Mumbai International Airport Ltd ($800 million in June), and Sammaan Capital ($300 million in August).
The ECB slowdown in 2025 was in part due to the rupee weakening by over 6% against the dollar due to strong demand for the US currency, foreign portfolio outflows, and US tariffs on Indian goods. Last week, the domestic currency hit an all-time low of 91.7450 against the dollar on steep demand for the greenback from importers and foreign portfolio investors.
The biggest challenge that companies have faced this year is the steep hedging rates for borrowing abroad because of the rupee’s depreciation over the past year. On the other hand, domestic rates have only eased since February 2025, following the RBI’s cumulative 125 bps cut in the repo rate.
“Opportunities arise because domestic liquidity and funding availability are tight, not because of rates. Rates vary from company to company, and even if dollar rates are low, hedging costs can be high due to a depreciating rupee and tariff-related risks. So, even if dollar rates appear competitive, the overall lending cost may not be attractive. Still, corporates may opt for ECBs because they need funds and face challenges in raising money domestically,” said Gupta of Icra.
