Choosing between term loan & overdraft?

Ashish Gupta, TNN, Apr 9, 2004, 04.07am IST

Many banks and housing finance companies (HFCs) offer the options of term loans or
overdrafts to borrowers. The borrower has the option to choose between either of these two.
But what is the difference between these two options? How should you decide between the
two? Which one is better? Actually, both have their pros and cons.

Generally, most HFCs offer only term loans, while banks offer both term loans and overdraft
facilities. In case of term loans, the loan amount is fixed and interest is charged on the whole
loan amount.

The borrower should opt for a term loan when he wants to make a fixed installment payment
for the property purchased. An ideal situation for term loan would be buying of an under-
construction or ready property where the loan amount one will opt for is known in advance.
The period of term loan can go up to 30 years.

SBI thinks long term in loan asset growth

abroad
ET Bureau, Nov 16, 2010, 06.19am IST

MUMBAI: The State Bank of India (SBI) has crystallised an international banking strategy

focused on creating long-term loan assets that will provide the bank with a better return. The
new strategy has been formalised in the aftermath of the global financial crisis, which
compelled India's top banks to revisit plans for their global business.
The country's largest bank, which accounts for a fifth of all bank lending, has now started
providing loans for an average maturity of three- and-a-half years against one year in the
past. Besides, the bank provides foreign currency loans only if the parent company
guarantees the loan availed by its overseas subsidiary.

This was indicated by Pradeep Chaudhuri, deputy managing director of SBI, in charge of
international operations. SBI has a presence in 32 countries through 151 offices, the majority
of which are branches of SBI while six of them are in the form of subsidiaries and some are
representative offices. The change in policy has helped the bank show higher return on
average assets on its international books to 1.31% as on September from 0.95% a year ago, he
said.

Reliance signs $250-mn term-loan facility to buy

back bonds
TNN, Jul 12, 2002, 11.23pm IST

MUMBAI: Reliance Industries has signed a $250m cross-border syndicated term loan
facility to buy back bonds with residual maturities of 3-25 years.
ABN Amro Bank, ANZ Investment Bank, Credit Lyonnais and Standard Chartered Bank are
the mandated arrangers to the buyback. The general syndication of the facility will be
launched shortly.

The term loan will have an average maturity of five years though the pricing has not yet been
determined. However, a banker involved with the transaction said, "the coupon would be
well below 120 basis points (100 basis points make one percentage point) above Libor."

"In keeping with the Reliance group philosophy, it is a constant endeavour of the group to
proactively manage its external debt portfolio to reduce the weighted cost of debt," said Alok
Agarwal, treasurer, Reliance group.

UBS Warburg has already put out an open tender offering to buy back bonds. The offer will
close on July 18, '02.

Reliance has about $400m in outstanding bonds and with a view to lowering its interest
costs, is doing a buyback. The buyback would include a part of the much publicised 30-year
Yankee bonds issued by Reliance a few years ago.

In July '97, Reliance closed a $150-million, 30-year debt deal in a private placement
transaction with a group of European institutional investors.

The deal, struck at a coupon of 7.625 per cent, with an innovative `rolling put' structure was
the lowest cost international borrowing for RIL at that time.

"Even if the bonds that are tendered in cross $250-mn, Reliance would have the option of
meeting payments out of its export earner's foreign currency (EEFC) account," said one
banker.

This is a facility that the Reserve Bank of India allowed earlier this year. Corporates can also
buy back foreign currency bonds by using the proceeds of overseas equity offerings.

Separately, Reliance has raised Rs 100 crore through a five-year term loan at a coupon of 8
per cent, one of the finest ever rates achieved by any corporate. The bond offering was done
through Citibank.

HOEC raises Rs 448 cr term loan from banks

PTI, Nov 8, 2006, 03.40pm IST

MUMBAI: Hindustan Oil Exploration Company Ltd on Wednesday said it has entered into an
agreement with a banks for availing a term loan of Rs 448.02 crore ($100 mn).
The company entered into an agreement with a consortium of banks co-led by IDBI Bank and UTI
Bank for availing a US dollar denominated term loan of Rs 448.02 crore ($100 mn), HOEC informed
the Bombay Stock Exchange.
The funds would be used to part-finance the development of an oilfield in Cauvery offshore area.
HOEC has 100 per cent participating interest in the PY-1 field, it said.