After dwindling to a seven-quarter low of $3.68 billion in the first quarter, overseas borrowings of Indian corporates picked up momentum in the second quarter as borrowers, especially non-banking lenders, tapped the overseas market for lending needs as well as refinance their earlier costly loans. 

According to latest RBI data, India Inc raised $6.67 billion via external commercial borrowings (ECBs) during the July-September quarter. Fund-raising via ECBs touched a historic monthly low of $361.6 million in April amid rising interest rates led by liquidity tightening by global central banks. This has made overseas fund-raising less attractive vis-a-vis domestic borrowings. However, the offshore borrowing trend quickly reversed to pick up $1.51 billion in May and $1.81 billion in June. 

Bank credit growth

The volume of overseas borrowing maintained upward momentum in the second quarter with Indian corporates raising $1.51 billion in July followed by $2.47 billion and $2.69 billion in the following two months. 

Surprisingly, the growth in offshore borrowings comes at a time when global central banks are planning more rate hikes to tame high inflation. Furthermore, the increase in overseas borrowings is at a time when there is a strong growth in bank credit in the domestic market. 

Gross bank credit growth posted a robust growth of 16.4 per cent, year-on-year (y-o-y), in September compared with 6.7 per cent increase a year ago. Credit to industry also grew by 12.6 per cent from 1.7 per cent during this period. 

Almost all major banks posted a double-digit growth in corporate credit during the second quarter of the current fiscal. While State Bank of India registered a 22 per cent growth in corporate credit, on a year-on-year basis, during Q2FY23, the largest private sector lender HDFC Bank posted an even higher growth of 27 per cent during this period. ICICI Bank also said its corporate loan book grew by 23 per cent during the latest quarter. 

On-lending / repayment

Nearly a third of overseas borrowings raised during April-September was used for further lending purposes. As per RBI data, $3.43 billion was raised for ‘On-lending/sub-lending’ purpose followed by $1.31 billion for ‘refinancing’ of earlier ECBs.  New projects ($1.3 billion) and working capital ($1 billion) are the other major fundraising purposes during this period. 

Among major borrowers, Housing Development Finance Corporation raised $1.1 billion in ECBs during H1FY23 followed by EXIM Bank ($700 million), FS India Solar Ventures Private Ltd., ($550 million), Tata Sons ($500 million) and REC Ltd., ($450 million). 

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