In what is seen as one more indicator of lack of demand in the economy, India Inc borrowed about $2 billion less via external commercial borrowings in the first six months of the current financial year, compared with the year ago period.

This mirrors the trend in the demand for bank credit, with the year-on-year growth slowing to a single digit.

What the trends suggest is that demand for fresh investments in the economy continues to be tepid.

According to the RBI data, Indian companies borrowed $11.792 billion via external commercial borrowings (ECBs) in the first six months of the current financial year ended, against $13.956 billion in the year ago period.

In 2014-15, India Inc tapped the ECB route to borrow $28.385 billion. This was $4.847 billion less compared to the previous financial year.

ECBs refer to commercial loans in the form of bank loans, securitised instruments (that is floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares), buyers’ credit and suppliers’ credit availed of from non-resident lenders with a minimum average maturity of three years.

These loans can be accessed under two routes — automatic route (do not require Reserve Bank/ Government approval) and approval route.

ECB can be raised for investment such as import of capital goods, new projects, modernisation/expansion of existing production units in real sector — industrial sector including small and medium enterprises, infrastructure sector and specified service sectors — hotel, hospital and software and miscellaneous services sector.

The weighted average margin over six-month LIBOR (London Inter-Bank Offered Rate) or reference rate for floating rate loans has shrunk to 1.07 per cent in September 2015, against 2.21 per cent in the year ago period.

In the first six months of the current financial year, the loan portfolio of scheduled banks at an aggregate level dipped a shade by ₹211 crore to stand at ₹70,38,086 crore as on October 2, 2015. However, in the corresponding year ago period, credit uptake from the banking system was robust at ₹1,82,889 crore.

State Bank of India’s research report ‘Ecowrap’, referring to the RBI data, said that all scheduled credit growth (year-on-year) stood at 9.5 per cent as October 2, 2015, compared to last year (October 3, 2014) growth of 10.4 per cent. However, the month-on-month credit growth picked up to 12-month high of 1.9 per cent as on October 2, 2015.

“We are seeing credit growth in sectors such power, steel, green energy, hydrocarbon and telecom in the coming quarters. We also expect growth in personal loan segment especially in housing (due to rationalisation of risk weights and loan to value ratios) and in vehicle loan (due to festival season),” said the report.

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