Pakistan raises record $3 billion through dual-tranche Eurobond

[jr_pdf]

There is no such thing as an implicit guarantee. It is either present in the covenant or not and the borrowers are expatriate individuals , not some sophisticated financial institutions who can spend millions arguing for that in court. Anyway, the discussion is academic since default is unlikely, but the bottom line is that the central bank has been able to increase reserves by 130 bn without having to borrow a cent on behalf of the government. Of course, it has taken FX risk, but it is ridiculous to imply that India is in a worse situation than Pakistan.

I dont think India issues a lot of sovereign dollar debt , but according to google , State Bank of India, which is India's largest bank ( not the central bank) issued 5 year dollar bonds less than a month ago at 88 bps over 5 year US Treauries and paid a coupon of 5.25%. If an Indian bank was able to borrow at that rate, I am sure India can issue sovereign debt at a lower interest rate.

Overseas Indians have stronger bargaining power, and in order to maintain the prestige of the Hindu motherland, such extra-contractual guarantees must exist. Moreover, there are many examples of the Indian government bailing out banks to prevent them from turning into nationwide financial crises.

Yes Bank (2020): One of India's Largest Bank Bailouts

As the fourth-largest private bank in India, Yes Bank was pushed to the brink of collapse by a massive pile of bad loans and failure to raise capital.

• Intervention: In March 2020, the Reserve Bank of India (RBI) placed the bank under a 30-day moratorium. It then orchestrated a reconstruction plan in which the State Bank of India (SBI) led a consortium of banks to inject capital and took a 49% stake in Yes Bank.
• Bailout method: A "systemic self-rescue" orchestrated by the central bank and led by a state-owned giant—designed to stabilize the broader financial system, rather than a direct injection of fiscal funds.

Sources:

---

IDBI Bank (2018): State-Owned Insurer Steps In

Once one of India's largest state-owned banks, IDBI Bank was weighed down by a non-performing asset (NPA) ratio that had climbed to nearly 28%.

• Intervention: In 2018, the government pushed the Life Insurance Corporation of India (LIC), the country's largest state-owned insurer, to acquire a 51% controlling stake in IDBI Bank.
• Bailout method: A classic case of "state capital bailout"—using insurance funds to recapitalize a state-owned bank and avoid direct fiscal outlay.

Sources:

---

Lakshmi Vilas Bank (2020): Foreign Acquisition

Months after the Yes Bank crisis, another private bank, Lakshmi Vilas Bank, found itself in serious financial distress.

• Intervention: At the RBI's request, Singapore-based DBS Bank took over the troubled lender.
• Bailout method: India's first instance of using a foreign institution to take over a distressed domestic bank—another government-orchestrated bailout.

Sources:

---

PMC Bank (2019–2026): Merger of a Cooperative Bank

The Punjab & Maharashtra Co-operative Bank (PMC Bank) was exposed by a fraud that revealed a massive hole in its finances.

• Intervention: The RBI crafted a merger scheme, combining PMC Bank with Unity Small Finance Bank. The merger was upheld by the Bombay High Court in March 2026 and by the Supreme Court in July 2026.
• Bailout method: Had the bank been liquidated, depositors would have received only up to ₹500,000 under the deposit insurance scheme. Through the merger, 100% of depositor principal was protected—showing that the government and central bank will go to great lengths to shield depositors in extreme cases.

Sources:

---

Government's "Standard Practice": Repeated Capital Injections into State-Owned Banks

Beyond these one-off rescues, routine state bank bailouts are the norm.

• Massive capital injection: In October 2017, the government announced an unprecedented ₹2.11 lakh crore (approx. $32 billion) recapitalization plan for state-owned banks.
• Ongoing support: Over the years, total capital infusions into state-owned banks have exceeded ₹3.1 lakh crore (more than $40 billion).

Sources:

---

Summary

In short, the Indian government's toolkit for bailing out failed banks includes:

• Administrative takeover & moratorium: The RBI takes direct control and restricts operations to contain risk.
• State-owned "rescue": A strong state bank (e.g., SBI) leads the bailout.
• State capital injection: State-owned institutions (e.g., LIC) are used to recapitalize troubled banks.
• Merger & consolidation: A failed bank is merged with a healthier one to preserve its business and protect depositors.
• Massive fiscal injections: Direct government funding to resolve systemic NPA problems.
• Deposit insurance: A safety net of up to ₹500,000 per depositor per bank.

 

[Owaiz]

Overseas Indians have stronger bargaining power, and in order to maintain the prestige of the Hindu motherland, such extra-contractual guarantees must exist. Moreover, there are many examples of the Indian government bailing out banks to prevent them from turning into nationwide financial crises.

Yes Bank (2020): One of India's Largest Bank Bailouts

As the fourth-largest private bank in India, Yes Bank was pushed to the brink of collapse by a massive pile of bad loans and failure to raise capital.

• Intervention: In March 2020, the Reserve Bank of India (RBI) placed the bank under a 30-day moratorium. It then orchestrated a reconstruction plan in which the State Bank of India (SBI) led a consortium of banks to inject capital and took a 49% stake in Yes Bank.
• Bailout method: A "systemic self-rescue" orchestrated by the central bank and led by a state-owned giant—designed to stabilize the broader financial system, rather than a direct injection of fiscal funds.

Sources:

---

IDBI Bank (2018): State-Owned Insurer Steps In

Once one of India's largest state-owned banks, IDBI Bank was weighed down by a non-performing asset (NPA) ratio that had climbed to nearly 28%.

• Intervention: In 2018, the government pushed the Life Insurance Corporation of India (LIC), the country's largest state-owned insurer, to acquire a 51% controlling stake in IDBI Bank.
• Bailout method: A classic case of "state capital bailout"—using insurance funds to recapitalize a state-owned bank and avoid direct fiscal outlay.

Sources:

---

Lakshmi Vilas Bank (2020): Foreign Acquisition

Months after the Yes Bank crisis, another private bank, Lakshmi Vilas Bank, found itself in serious financial distress.

• Intervention: At the RBI's request, Singapore-based DBS Bank took over the troubled lender.
• Bailout method: India's first instance of using a foreign institution to take over a distressed domestic bank—another government-orchestrated bailout.

Sources:

---

PMC Bank (2019–2026): Merger of a Cooperative Bank

The Punjab & Maharashtra Co-operative Bank (PMC Bank) was exposed by a fraud that revealed a massive hole in its finances.

• Intervention: The RBI crafted a merger scheme, combining PMC Bank with Unity Small Finance Bank. The merger was upheld by the Bombay High Court in March 2026 and by the Supreme Court in July 2026.
• Bailout method: Had the bank been liquidated, depositors would have received only up to ₹500,000 under the deposit insurance scheme. Through the merger, 100% of depositor principal was protected—showing that the government and central bank will go to great lengths to shield depositors in extreme cases.

Sources:

---

Government's "Standard Practice": Repeated Capital Injections into State-Owned Banks

Beyond these one-off rescues, routine state bank bailouts are the norm.

• Massive capital injection: In October 2017, the government announced an unprecedented ₹2.11 lakh crore (approx. $32 billion) recapitalization plan for state-owned banks.
• Ongoing support: Over the years, total capital infusions into state-owned banks have exceeded ₹3.1 lakh crore (more than $40 billion).

Sources:

---

Summary

In short, the Indian government's toolkit for bailing out failed banks includes:

• Administrative takeover & moratorium: The RBI takes direct control and restricts operations to contain risk.
• State-owned "rescue": A strong state bank (e.g., SBI) leads the bailout.
• State capital injection: State-owned institutions (e.g., LIC) are used to recapitalize troubled banks.
• Merger & consolidation: A failed bank is merged with a healthier one to preserve its business and protect depositors.
• Massive fiscal injections: Direct government funding to resolve systemic NPA problems.
• Deposit insurance: A safety net of up to ₹500,000 per depositor per bank.

That is beside the point. The United States will also certainly bail out JPM, BofA, Citi, Wells and other large banks. That does not mean they can raise unsecured deposits exceeding FDIC insurance limits at the same rate as the US Treasury or that there is an implicit US government guarantee. The precise legal protections matter. That is why SBI is paying 6.5% on unsecured deposits vs less than 5.5% on a secured bond and why India's sovereign borrowing rate will be lower that that for any obligation that the Indian government is "implicitly" expected to support.

Anyway, this thread is about the Pakistani funding which is backed by Pakistan's explicit sovereign guarantee and has been raised at market rates of up 7.75% and 8.25% and will not increase reserves by even a cent because it will be fully used to repay the biradar al Sauds.

 

[Goenitz]

 

[hydrabadi_arab]

Five years ago, when Pakistan issued Eurobonds, it had to pay up to 8.9% interest despite low global interest rates. Today in an environment of high global interest rates, it achieved the largest bond transaction in history worth $3 billion at 7.5% and 7.9%, with bids totalling nearly $6 billion!

 

[Owaiz]

Five years ago, when Pakistan issued Eurobonds, it had to pay up to 8.9% interest despite low global interest rates. Today in an environment of high global interest rates, it achieved the largest bond transaction in history worth $3 billion at 7.5% and 7.9%, with bids totalling nearly $6 billion!

This is what actually happened. 5 year and 10 year maturities were issued at lower coupons in 2021 than this time. The 8.875 % per cent was for a 30 year bond which is riskier and was not issued this time. You cannot compare apples to oranges.


1 billion 5.875 percent 5 years 8 April 2021 Tenor completed [16]
1 billion 7.375 percent 10 years 8 April 2021 Due in April 2031 [17]
500 million 8.875 percent 30 years 8 April 2021 Due in April 2051 [17]

 

[SoulSpokesman]

@Owaiz sb

Obviously, it is not free, and the central bank is taking on a lot of FX risk.

The RBI has no choice, there are a lot of FX positions it took in the past which are coming due. Sadly, we have been unable to contain our energy imports (by self-sufficiency programmes) or gold imports (by better recycling of domestic gold) or boost imports. The chicken are now coming home to roost and will till oil prices normalise.

Having said that, with GoUS borrowing costs inching towards 5%, neither IND nor PAK borrowing costs in the international market is excessive. It is what it is.

Regards