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Union Bank of India has successfully issued $600 million in US dollar-denominated bonds through its Dubai branch, marking its first such issuance in over a decade. The lender raised $300 million each through three-year and five-year bonds, offering an attractive yield of 5.23% and 5.4170% respectively. The three-year bonds were priced at 93 basis points above US Treasuries, while the five-year bonds were priced at 102 basis points above Treasuries, which is significantly lower than the bank's initial guidance of 120-130 basis points.

This move comes after the central bank introduced a discounted hedging facility that reduces borrowing costs for financial institutions. India's top two state-run banks, State Bank of India and Bank of Baroda, have also tapped the dollar debt market, raising $500 million and $700 million respectively through public sales, with the former adding $600 million through the private route.

IDFC First Bank is also in the fray, having raised $350 million through a private placement of five-year securities. With the RBI's discounted dollar deposit scheme, banks are keen to raise funds to provide leverage to customers. The rush for dollar issuances has prompted offshore fundraising by Indian lenders, who raised a total of $11.25 billion through bond issuances between June and August.

The window for hedging non-resident deposits provided by the RBI will end a month early on August 31, further driving the banks to complete their dollar issuances.