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Funds Crisis! India Inc's Dependence On Foreign Banks Rises

Dec 18, 2018, 14:15 PM IST
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Local firms are growing more dependent on banks to raise offshore funds going into 2019 as the bond markets sputter, rupee funding from domestic banks falls.

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Foreign-currency loans

Foreign-currency loans

130 bps more average margins on Indian five-year foreign-currency loans over Libor in 2018. Image Source: Reuters

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Dollar bonds

Dollar bonds

109 bps rise in spreads over treasures for dollar bonds of local issuers. Image Source: Reuters

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State Bank of India

State Bank of India

115 bps over Libor State Bank of India is paying for its $500 million five-year loan. Image Source: Reuters

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Distress assets limit

Distress assets limit

$210 billion distress assets limit India's banks capacity to lend. Image Source: Reuters

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SBI paying its similar-tenor facility

SBI paying its similar-tenor facility

10 bps More SBI is paying over its similar-tenor facility in 2017. Image Source: Reuters

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Indian Oil Corp

Indian Oil Corp

100 bps margin IOC is offering on a $1.3 bn 5-yr loan. Image Source: Reuters

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Borrowing Trends

Borrowing Trends

1. Many issuers are looking at offshore loans due to low liquidity in the rupee debt markets.

2. Borrowers find offshore loans easier to raise funds, even though pricing is up.

3. Loan costs are heading up but had fallen so much earlier that they are still lower.

4. The political uncertainty and risks for volatility in the rupee are reasons for the rise in pricing. Image Source: Reuters

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