India's state-run REC, SIDBI eye floating-rate bond sales before RBI decision, sources say

REC

29/05/2026 12:54

By Dharamraj Dhutia

    MUMBAI, May 29 (Reuters) - Two Indian state-run financial institutions are set to tap the floating-rate bond market, seeking to raise as much as 80 billion rupees ($842 million) via debt sales before the central bank's policy decision, three sources aware of the matter said on Friday. 
REC may raise 30 billion to 50 billion rupees, while Small Industries Development Bank of India (SIDBI) may raise 30 billion rupees through bonds maturing in about three years. 
Both companies have generally relied on fixed-rate bonds. REC has yet to issue bonds this financial year, while SIDBI has raised around 30 billion rupees through bonds maturing in three years and three months at 7.61% coupon. 
"The companies have already started the talks and negotiations for the spread that they could offer over the underlying benchmark, which in this case is the three-month treasury bills," one of the sources said. 
"SIDBI is eyeing around 130-140 bps over T-bills, while REC is aiming for 150-160 bps, but the levels are not yet finalised," the source added. 
The sources requested anonymity as they are not authorised to speak to the media. 
The companies did not reply to Reuters emails seeking comment. 
Coupons for such floating-rate bonds are priced at a spread over three-month Treasury bill yields and reset quarterly. 
When rate hikes are expected, these bonds become more attractive for both issuers and investors, as companies can borrow at a lower initial cost, while investors benefit from returns that could rise over time, without reinvestment risk. 
Earlier this month, Cholamandalam Investment, Muthoot Finance, Tata Capital, Mahindra & Mahindra Financial Services, HDB Financial Services, 360 One Prime, and ICICI Home Finance Co were among the major issuers of such notes.
Bets that the Reserve Bank of India will raise interest rates as early as next week or in August have strengthened, with inflation expected to rise amid persistently high oil prices stemming from the Iran war.
India's overnight index swap rates have surged, with the one-year swap now pricing in around 100 bps of rate hikes over the next 12 months.     

($1 = 95.0000 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Eileen Soreng)
 ((Dharamraj.Dhutia@thomsonreuters.com;))