India's second largest private lender, HDFC Bank announces that it is eager to raise funds through international borrowing and is waiting for the detailed guidelines of Reserve Bank of India (RBI).

On November 15th, RBI scaled down banks' provisioning norms for the real estate sector and said that it would allow housing finance companies (HFCs) to raise short-term borrowings overseas.

HDFC's Managing Director Keki Mistry said: "We would like to raise funds overseas and we can do that if allowed. But it all depends on the regulations relating to the size and tenure permitted by RBI." An international borrowing is expected to reduce the cost of funds for the company providing credit.

HDFC has earlier raised overseas funds in various currencies. The bankers revealed that currency does not matter as funds are anyway converted into rupees. The crucial aspect remains the RBI's guidelines on tenure and cost. HDFC bank has all its liabilities with an average tenure of seven years and therefore requires funds designed for a longer term.

If cost potential is taken into account then foreign currency borrowing need to have a minimum tenure of three years so that the fixed cost of fund raising including fees paid to bankers is justified.

The RBI guidelines for foreign currency are expected to be declared in the coming days. The housing finance companies are also expecting a relaxation in the capital requirements along with an easing on foreign currency borrowing. National Housing Bank (NHB) usually follows the prudential norms on home loans prescribed by RBI.

The cost of funds for HDFC has not come down despite RBI's measures of reducing rates including CRR and repo. The bank is still paying a high interest rate and fixed deposits that earn interest up to 10.9% have become the base for bank's borrowing that account for 20% of funds.