Punjab National Bank has sought government permission to raise $215 million overseas to finance a debt restructuring package for textiles and steel companies and is also planning to raise Rs 250-300 crore (Rs 2.50-3 billion) subordinated debt to augment its tier-II capital.
"We have already applied to the finance ministry (for the foreign currency borrowing) and are awaiting an approval," said a bank executive.
The bank has not yet decided whether the funds would be raised through a bond issue or through a loan.
A senior bank executive said that the timing for raising the subordinated debt has not been decided but the funds would be raised domestically.
"At the moment we are not short of funds but propose to raise it by the end of the current financial year," he added.
The government had tightened its foreign loan policy in November and said external borrowings above $50 million would be allowed only for equipment imports and infrastructure projects.
Other Indian companies such as Industrial Development Bank of India and state-run utility National Thermal Power Corporation are also looking to raise cheaper funds from the international market.
IDBI plans to raise $300 million through a five-year overseas bond issue to restructure the debt of steel companies, while NTPC plans to mop up $200 million via a seven-year Euro bond issue to fund ongoing and new projects.