Bank

Foreign banks lift long-term lending

PUBLISHED : Monday, 13 September, 1993, 12:00am
UPDATED : Monday, 13 September, 1993, 12:00am

MORE willingness among foreign banks to lend to India has led to local banks being able to make long-term commercial loans after a three-year gap.


Banks can again tap the markets overseas for loans of five to six years' maturity.


India's overseas credit rating has not been upgraded from BB-plus, which is not investment grade. However, the change in perception of India's credit risk is due to the improved economy, bankers say.


Between June and August, the State Bank of India (SBI) was able to borrow about US$200 million.


The interest rate on loans from these funds to customers is about eight per cent. If the rate is floating, customers can borrow at a lower rate of about the London interbank offered rate plus 2.5 percentage points.


Among the companies expected to use these commercial borrowings are Century Textiles of the Birla group, which wants to borrow $40 million; Gujarat Narmada Valley Fertiliser Corp, about $21 million; and Klockner Pentaplast, $7 million.


''Three months ago, we could not have made such a lucrative offer to these companies,'' said a senior SBI executive.


Cash-rich Japanese banks seem the most willing to make long-term commitments.


Lenders have gained confidence as India's reserves have increased from barely $1 billion in 1990 to more than $7 billion now, according to bankers.