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Loan Syndication - Introduction

The document discusses loan syndication and offshore banking. It defines loan syndication as a process where a group of banks collaborate to provide a loan that is too large for a single bank. It also discusses the roles and benefits to the various parties involved. Offshore banking refers to banks located outside a depositor's country of residence and provides advantages like low taxes and interest rates linked to LIBOR. However, it can also enable underground economies and money laundering. The document provides examples and details about SBI's involvement in offshore banking.

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Raj Jadhav
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Download as PPTX, PDF, TXT or read online on Scribd
4K views

Loan Syndication - Introduction

The document discusses loan syndication and offshore banking. It defines loan syndication as a process where a group of banks collaborate to provide a loan that is too large for a single bank. It also discusses the roles and benefits to the various parties involved. Offshore banking refers to banks located outside a depositor's country of residence and provides advantages like low taxes and interest rates linked to LIBOR. However, it can also enable underground economies and money laundering. The document provides examples and details about SBI's involvement in offshore banking.

Uploaded by

Raj Jadhav
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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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

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