Domestic companies borrowed Rs 50,556 crore from overseas markets through external commercial borrowings(ECB) and foreign currency convertible bonda(FCCBs). Domestic commercial banks alloted fresh loans worth Rs 42,976 crore to the industry during the period.
A back-of-the envelope calculation indicates that with ECBs equivalent to around Rs 12,500 crore approved during April-July 2005, the domestic credit to the industry is estimated to be slightly over Rs 10,000 crore. The total non-food credit which includes loans to industry, retail borrowers, farmers and builders during April-July 2005was around Rs 53,000 crore.
Small industries normally stay away from ECBs as the all in-cost ceiling for borrowing is 200 basis points(bps) over the six-month Libor(London interbank offered rate)for three-five year loans and 350 bps over Libor for loans with duration of more than five years. However, for top-rated corporates which manage to negotiate finer rates over Libor, the ECB route has been working out much cheaper over domestic borrowings where banks lend up to 200 bps below the benchmark prime lending rate, which is currently ruling around 10%. |
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| Posted : 9/14/2005 |
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