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| Edited By: Yogini Joglekar,Neelasri Barman |Source: DNA |Updated: Mar 18, 2018, 02:10 AM IST
After touching a record high of $3,201,303,488 in December, external commercial borrowings (ECBs) by Indian companies dropped 15.36% month on month in January.
According to Reserve Bank of India (RBI) data released on Thursday, ECB mobilisations in January amounted to $2,709,292,776.
ECBs include bank loans, suppliers’ and buyers’ credits, fixed and floating rate bonds without convertibility and borrowings from private sector windows of multilateral financial institutions.
“In December, the amount raised by Indian firms by way of ECBs had touched a record high because it was the year-end and many foreign banks resort to a lot of ECB lending. That was not the case in January,” said an investment banker of a foreign bank who did not wish to be named.
The investment banker also said that many foreign banks, primarily Asian, are reaching their ECB limits for India.
ECB mobilisations are expected to fall further in the coming months.
Hemant Mishr, managing director and head of global markets (South Asia), Standard Chartered Bank, said ECBs could slow down further because foreign investors are taking a cautious view on India, mainly due to the negative press on the telecom and real estate sectors.
Besides, in the wake of the events in Japan, banks in that zone will go slow on ECB exposures, said another investment banking source.
A few investment bankers though remain optimistic on ECBs and hope that it will continue to remain an attractive source for raising capital.
Asit Bhatia, managing director (corporate & investment banking), Bank of America said this was because the fully hedged cost of raising offshore debt is lower than the cost of rupee debt, more so with the rising interest rates in India.
The all-in-cost ceiling over six-month Libor for ECB loans of 3-5 years duration is 300 basis points, or three percentage points. For long-term borrowings —- duration more than five years —- it is six-month Libor plus 500 basis points. The six-month Libor is currently at 0.46%.
