UTI Bank, one of India's largest private sector lenders, plans to issue perpetual bonds that will qualify as tier-one capital to take advantage of proposed changes to Reserve Bank of India regulations, said UTI Bank's chairman and managing director P. J. Nayak.
Speaking to reporters at the opening of the Singapore branch, Nayak said UTI Bank hopes to open an office in Shanghai next month, followed by a branch in Hong Kong by the end of September.
The bank has also applied to open five retail branches in Sri Lanka, a branch in the Dubai International Financial Center and a representative office in Abu Dhabi.
"We have fairly ambitious plans to create a footprint in Asia," he said.
Nayak said the Singapore branch will initially focus on merchant banking and trade financing, and its activities will including trading in foreign currencies other than the Singapore dollar.
"There is a considerable opportunity for Indian companies to raise money overseas, and our presence in Singapore would act as an anchor point for them," he said.
The Singapore branch could in future serve as a second hub for its nonresident Indian, or NRI, customers, he added.
NRI is a term used to describe Indian passport holders who live abroad and who are exempt from many of the currency controls imposed by the Indian government.
Nayak said UTI Bank has applied to the RBI, India's central bank, for permission to issue perpetual bonds that will qualify as Tier-1 capital.
These hybrid bonds will be listed in either London or Singapore depending on where liquidity and demand for the paper is likely to be greater, he said.
The issue of hybrid debt will be preceded with an issue of short-term paper and then medium-term bonds, as UTI Bank believes it can get better pricing by gradually raising the tenor.
The series of bond issues is "doable" by the end of this year, Nayak said.
Nayak said UTI Bank will likely become the first Indian bank to list hybrid bonds overseas, although there's a possibility it could be overtaken by two other Indian banks that have also applied to the RBI for permission to sell similar debt abroad.
UTI Bank was set up in 1994 after India passed laws allowing the establishment of new private sector banks. Its early sponsors included Unit Trust of India, which is currently its largest shareholder with about 27%.
According to Nayak, UTI may be prepared to further reduce its stake in UTI Bank to ensure a division between its asset management activities and its ownership of a bank.
UTI Bank has 450 branches across India and plans to open about 100 branches a year in the next three years, Nayak said.
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