India Inc raised about 29 per cent less via external commercial borrowings (ECBs) in the first five months of FY23 at $7.669 billion compared with $10.8726 billion in the year-ago period. This decline comes even as the companies are increasingly tapping domestic banks for credit.
The rise in interest rates in advanced economies and the depreciation of rupee are proving to be dampeners in raising ECBs. The decline in funds raised comes despite the limit under the automatic route being temporarily doubled from $750 million per financial year to $1.5 billion, and the all-in cost ceiling under the ECB framework also being raised by 100 basis points.
India Ratings, in a note, said ECBs have become costlier due to a rise in the benchmark rate and increase in hedging cost. So, some portion of this would also get refinanced by bank funding.
According to the Reserve Bank of India’s (RBI) latest monthly data, India Inc raised $2.472 billion in August 2022, down 13 per cent compared with $2.8468 billion mopped up in August 2021. During the reporting month, the entities that raised $50 million and above include HDFC ($1.1 billion), FS India Solar Ventures Pvt Ltd ($500 million), Fullerton India Credit Co ($350 million), Balkrishna Industries ($60.7 million) and Toyota Financial Services India Ltd and IIFL Finance ($50 million each).
According to RBI’s sectoral deployment of bank credit, credit growth to the industry accelerated to 11.4 per cent in August 2022 from 1.5 per cent in August 2021.
Size-wise, credit to large industry grew by 6.4 per cent against a contraction of 2.6 per cent a year ago. Medium industries recorded a credit growth of 35.6 per cent (52.3 per cent), while credit growth to micro and small industries accelerated to 28.2 per cent (12.1 per cent).