The Hindu Business Line : Banks see positive impact from new ECB norms

CREDIT offtake in banks, in terms of rupee borrowings, will receive a substantial boost as a result of the government's tightening the screws on External Commercial Borrowings (ECBs), according to bankers.

The stricter ECB norms come as a dampener to a number of non-triple A rated corporates who need to raise funds. These corporates will now actively look to banks for financing support, as there is not much demand for such corporate issuances even in the domestic debt market, according to analysts.

Bankers feel that with this move, corporates are indirectly being coerced to once again come to banks to borrow funds. "These measures are serving the dual purpose of plugging excess dollar inflows and leaving limited avenues for corporate borrowings," said a banker.

While bankers have often cited the lack of any `greenfield' projects as a reason for the absence of credit flow into the old economy sectors, many claim there are signs of an industrial revival.

" The stricter ECB norms will definitely have a positive impact on credit offtake in banks in the near term", Ms Kalpana Morparaia, Executive Director, ICICI Bank, told Business Line.

In response to queries on whether the increased credit offtake is likely to see a pressure on lending rates, she responded, "There is an enormous amount of liquidity in the system and therefore there will not be any pressure on lending rates."

However, she added, the Indian Banks' Association's guidelines on the benchmark PLR issue was awaited to take a proper view in the matter.

One senior official with State Bank of India, confided, that lending rates may not go down any further. "It is difficult to say to a certainty, but it seems that in the wake of the global economic scenario it is unlikely that we can cut lending rates," he said.

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