Companies

India Inc’s external borrowings dip $2 b in H1

K Ram Kumar Mumbai | Updated on January 22, 2018 Published on November 13, 2015

BL14_P7_CURRENCIES.1

Bank credit growth too slows indicating tepid demand for fresh investments

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.

Published on November 13, 2015

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.