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Notwithstanding lower interest rates globally, Indian companies are going slow on external commercial borrowing (ECB), as there is not much need for funds amid economic slowdown.
Reserve Bank of India data shows companies borrowed $2,263 million in February, a fall of 12.6 per cent over the previous month and 47.4 per cent on a year-on-year basis.
“Industrial activity has not picked up much, due to which corporates are not borrowing much. Besides that, in currency pairs, there has been volatility in the past few months,” said a senior treasury official of a private sector bank.
Last week, the US Federal Reserve dropped a pledge to remain “patient” in its outlook towards monetary tightening, paving the way to end the ultra-low interest rate era.
However, markets cheered the US central bank’s decision to tread cautiously in tightening policy, due to a weakened growth and inflation forecast in the world’s biggest economy.
Though the Fed ended its stimulus programme in October 2014, European Central Bank President Mario Draghi announced earlier this year an expanded asset purchase programme, including private and public securities, to spur growth and counter deflationary pressure.
Foreign investors continue to be positive on Indian markets, due to prospects of growth under a stable government. As a result, companies do not find it difficult to secure loans from foreign investors.
