LOAN SYNDICATION & OFFSHORE BANKING
Loan Syndication - Introduction
Itis a loan extended by a group banks to a corporate
borrower
Collaboration among lenders to share in loan which
is too big to handle for any one of them
Also called participated loans or syndicated loans
Roles in syndicate loans
Lead managers
Participating bank
Underwriting bank
Facility Manager / Agent
Loan syndication - Process
Phase 1: Pre Mandate phase
Phase 2: Placing the loan
Phase 3: Post closure phase
Benefits of loan syndication
Benefits to borrowers:
Deals with single bank
Quicker and simpler
Benefits to Lead bank:
Enhancement of bank’s relationship with the
client
Benefits to participating banks:
Access to lending opportunities with low opportunit
cost
Participating banks have equal treatment in case borrow
runs into difficulty.
Advantages of syndicated loans
Sharing of credit risk between various financial institutions
Facilitates huge investments
Borrowers to access from a diverse group of financial
institutions
Syndicated loan facilities can increase competition for the
business, prompting other banks to improve in their
services
Disadvantages of Loan Syndication
Need for each bank to understand the
business activities
Negotiating documents with 4 to 5 banks
is a time consuming process
Intercreditor agreement required between
banks, which takes additional time.
Loan syndication - Applications
Export financing
Mergers & Acquisitions
Project Finance
Capital goods financing
Examples of loan syndication
2005: Reliance port & terminal raised
loan for expanding its port facilities.
Loan amount: Rs 42 Billion
Efforts to increase import of crude oil.
20 banks syndicated the loan.
Loan Syndication of Bharti-Zain Deal
Standard Chartered
Barclays
Bank of Bank of Sumitomo
Credit
S.B.I,ANZ, America HSBC, Tokyo Mitsui
Agricole
BNP Merrill DBS Mitsubishi Banking
CIB
Lynch UFJ Corp.
OFF SHORE BANKING
Off shore Banking - Introduction
A bank located outside the country of
residence of the depositor
Foreign branches of banks located out of India
Overseas banking units (OBU)
The OBUs would operate & maintain balance
sheet only in foreign currency
Off shore Banking - Introduction
Provides financial & legal advantages
Low taxes
Rates of interest linked to LIBOR of
corresponding
Operations of OBUs in rupees would be
minimum
Such operations in domestic areas would be
through Authorized Dealers (subject to
exchange regulations)
Off shore banking - Advantages
Greater privacy
Low or no taxation
Easy access to deposits
Protection against local political or
financial instability
OBUs will be exempted from CRR &
SLR
Off shore banking – Disadvantages
Less financially secured
Underground economy & organized
crimes through money laundering
These OBUs would be prohibited to
participate in domestic call, notice money
market.
Offshore banking – Services offered
Deposit taking
Credit
Wire and electronic fund transfer
LCs and trade finance
Investment management
Multi currency deposits accepted
Multi currency borrowing options
Offshore Banking - Regulations
Regulations monitored by IMF
Tightened anti-money laundering regulations
Internal revenue services
USA Patriot act
Control centers
Facts
As much as half the world's capital flows throug
offshore centers
Tax havens have 1.2% of the world's population
Tax heavens hold 26% of the world's
wealth, including 31% of the net profits of Unite
States’ multinationals
S.B.I Offshore Banking
Largest Offshore bank of India.
131 offshore branches across 32 countries.
Has branches in all the major trading
centers of the world.
London, Tokyo, Frankfurt, New York, Los
Angeles, Singapore, Shanghai etc.
FUNCTIONS OF S.B.I OBU’s
Raise funds in convertible foreign currency
as deposits and borrowings from Non
Residents sources.
Open foreign currency accounts abroad as
well as with other OBUs in India.
Transactin foreign exchange with residents
and banks in India according to FEMA, 1999.
FUNCTIONS OF S.B.I OBU’s
Maintain Special Rupee account with an
Authorised Dealer in India out of the
convertible foreign exchange resources for
meeting local expenses.
Provide customised loan and liability products
for the benefit of clients.
Buy Rupees from an Authorised Dealer in India
to fund the Special Rupee Account.
THANK YOU
