India Inc has moved to the slow lane of raising funds from abroad and at home, in a reflection of the sluggish economy and corporates’ reluctance to commit investments.

In the first 11 months of the current financial year, external commercial borrowings of Indian companies aggregated $15.69 billion, about 31 per cent lower than the $22.85 billion raised in the comparable year-ago period, according to Reserve Bank of India data.

ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities. Forms of ECBs include bank loans, buyers’/suppliers’ credit, and Foreign Currency Convertible Bonds.

Even adding the $2.94 billion raised via rupee-denominated bonds issued to overseas investors, the funds raised by India Inc from the overseas markets is about 18 per cent lower than the year-ago period.

The lower demand for overseas resources comes in the backdrop of tepid demand for bank credit in the reporting period. Scheduled banks’ reported cumulative credit de-growth of ₹3,417 crore in the April 1, 2016 to March 3, 2017 period. However, in the year-ago period (April 3, 2015 to March 4, 2016), the banks reported cumulative credit growth of ₹4,28,193 crore.

Madan Sabnavis, Chief Economist, CARE Ratings, observed that lower economic activity in the country is reflected not only in domestic credit not growing, but also the ECB numbers. “Now that they (the borrowers) expect the interest rate to go up in the US, automatically the cost of funding will go up,” he said.

“The way the rupee is behaving today is fairly whimsical because we would have all expected it to depreciate. So, if you are talking in terms of the exchange rate risk, especially during the year, it would have been high and that is one of the reasons why it would have not made sense for one to borrow overseas,” he explained.

He felt that tapping ECBs may no longer be attractive because there could be two more rate hikes by the US Fed this year.

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