MUMBAI - The overseas arm of India's Oil and Natural Gas Corp is expected to set an 8.40 percent coupon on bonds it is selling to raise up to 24 billion rupees ($515 million), two sources with direct knowledge of the matter said on Tuesday.

ONGC Videsh (OVL) had set an indicative upper limit of 8.50 percent on the five-year bonds, the two sources and others said earlier. The bonds are rated 'AAA' by Indian rating agency Crisil and carry a guarantee from OVL's parent.

The core size of the issue is 10 billion rupees and it has a greenshoe option for a further 14 billion rupees, the sources have said.

Ten arrangers have been appointed: Standard Chartered Bank, Trust Investment Advisor, AK Capital, ICICI Bank, ICICI Securities Primary Dealership, SBI Capital Markets, Citibank, Axis Bank, HSBC Bank, Kotak Mahindra Bank.

OVL had early this year raised 50 billion rupees via one-year commercial paper, and last month ONGC's chairman said ONGC was looking to refinance OVL's debt. ($1=46.8 rupees) (Reporting by Jeanette Rodrigues; Editing by John Mair)