MUMBAI: Tata Steel, India’s largest producer of the alloy, is in talks with banks for £3.5 billion ($5.4 billion) in loans for its UK unit, said four persons with direct knowledge of the matter. BNP Paribas SA, Credit Agricole CIB, HSBC Holdings and Royal Bank of Scotland Group are among the 11 banks that may lend £2.5 billion over five years, the sources said, declining to be identified before an official announcement.

Citigroup, Deutsche Bank AG, Standard Chartered and ING Vysya Bank may also provide funds, said one of the persons. State Bank of India may arrange a £1-billion loan over seven years, the sources added.

Tata Steel chief financial officer Koushik Chatterjee said on August 12 that the Mumbai-based steelmaker plans to refinance as much as $6.5 billion of long-term debt. The company took the loans to fund its $12.9 billion acquisition of Corus Group in 2007, just before the global economic slump pared demand for steel and caused banks to curtail lending.

Mr Chatterjee did not respond to calls or reply to an email sent on Friday. Spokespersons at Tata Steel and the banks didn’t immediately respond to email queries.

The five-year loan may pay interest of around 400 basis points more than the London interbank offered rate (Libor), the people said. A basis point is 0.01 percentage points. The interest rate on Tata Steel’s existing debt, due to be paid from 2012 to 2014, was at 210 basis points above Libor, said one of the people. Tata Steel may sell between $1 billion and $1.5 billion in bonds within the next year to repay a portion of the loans, they added. Tata Steel declined 0.64%to close at `539.95 in Mumbai trading on Friday. The stock has declined 13% this year, compared with a 4.4% advance in the benchmark Sensitive Index.