State-owned Indian Overseas Bank is looking to raise $500 million in external commercial borrowing in two equal tranches by the end of December using the Reserve Bank of India's (RBI) concessional swap facility.

The first tranche of $250 million will be raised at 6-6.25% rate in the next couple of weeks, managing director Ajay Kumar Srivastava told ET.

"We have decided to go for a staggered ECB mobilisation to make it most cost effective. There is consistent credit demand but mobilising lendable resources at one go and keeping it idle does not make sense," Srivastava said.

Earlier, IOB mobilised $1.2 billion in foreign currency non-resident bank deposits (FCNR-B) through the RBI's dedicated window while the MD said that the entire amount has already been deployed.

While the concessional facility for retail deposits was withdrawn from August 31, the latitude extends until the year end for funds mobilized through the ECB and overseas foreign currency borrowings routes.

The bank grew its gross advances by 24.35% year-on-year to Rs 3.46 lakh crore at the end of September. It targets a 20-21% credit expansion for the year.

"Besides rural, agriculture and MSME credit demand, we have a robust corporate loan pipeline. We disbursed Rs 17000 crore of corporate loans in the first six months of the fiscal while there is another Rs 20000 crore in the pipeline," Srivastava said, expecting 80-90% of it to be disbursed by the end of the fiscal.

The Chennai-headquartered lender on Monday reported a 56% rise in the second quarter net profit at Rs 1912 crore as compared with Rs 1226 crore in the year ago period. Its operating profit stood 26% higher at Rs 3,016 crore, riding on an equal growth in net interest income at 3,867 crore.

Its net interest margin for the quarter rose 16 basis points to 3.37% while gross non-performing assets improved to 1.19% at the end of the second quarter from 1.83% a year prior.