The Hindu Business Line : More direct debt funding from Japan bank

Indian banks and Japanese companies operating in the country can now look forward to more direct debt funding from the Japan Bank for International Cooperation (JBIC).

JBIC wants to enhance the size of its asset book under the international finance operations (IFO) window, where companies are directly approached and funding is typically done without a Government guarantee.

"We are looking at ending this year with total asset book of $1 billion on the IFO side. Our current commitment is about $700 million," Ms Mridula M. Mehta, International Finance Specialist at JBIC's New Delhi office told Business Line.

IFO window

In 2005, JBIC had restarted funding to India under the IFO window.

The IFO funding is aimed at promoting Japanese exports, imports and economic activities overseas. The IFO window is semi-commercial and interest rates are attractive than the commercial funding rates for dollar/yen finance.

"Funding under IFO is not as cheap as official development assistance (ODA), but cheaper than commercial finance. IFO is more flexible than ODA," Ms Mehta said.

JBIC had since December 2005 signed five agreements with various banks and financial institutions under the IFO window.

"As on date, we have completed transactions of $700 million (commitments), of which, $500 million to Indian banks and financial institutions and $200 million to Japanese companies in India, including Maruti and Mitsubishi Chemicals," she said.

Outstanding loans

The total outstanding loans to India under ODA stood at $11.81 billion.

Ms Mehta said that JBIC wants to in the coming days balance the share between IFO and ODA in India, which is now skewed in favour of the ODA.

"We have global asset book of about $200 billion, which is almost equally divided between ODA and IFO. About 53 per cent is in ODA and the rest in IFO. We want to do that in India also and make them almost equal sized," she said.

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