Big Ticket Offerings Lift Overseas Borrowings To Near Four-Year High In December

Big ticket issuances by Shriram Finance Ltd., Reliance Industries Ltd., REC Ltd. and Tata Capital Ltd. lifted overseas debt borrowings by Indian companies to a near four-year high in December, the Reserve Bank of India data showed.

External commercial borrowings by Indian corporations rose to $9.54 billion in December, sharply higher than $5.07 billion in the same period a year ago, according to data from the RBI. The last time offshore borrowing was this high was in March 2021 at $9.23 billion.

Over $3 billion of these ECB borrowings came from financial services companies and a private corporate. Shriram Finance tapped the overseas debt market about six times in December cumulatively raising $1.12 billion.

This has come as the Reserve Bank of India has been asking non-banking financial services to cut their dependence on bank borrowings and diversify their funding resources. In November 2023, the central bank had raised risk weights on bank lending to retail-focused NBFCs.

"The domestic credit environment with the RBI's push to reduce bank lending to NBFCs amid tight liquidity conditions and heavy lifting from these NBFCs has raised the overall ECB borrowing number higher in December," Anil Gupta, vice president financial sector ratings at ICRA, said.

Other corporates such as Interglobe Aviation Ltd., IIFL Finance Ltd., Indian Oil Corp. and JSW Steel Ltd. also met their funding needs through this route.

While merchant bankers believe that NBFCs may continue to tap the offshore borrowing route for their funding needs because of sizeable fundraising, the deferment in the banks' liquidity coverage ratio norms by the RBI may provide some comfort and the rise in rupee forward premiums may divert this borrowing towards the domestic market.

With the relaxation of the LCR norms, the appetite for credit growth will improve. Last week, newly appointed RBI Governor Sanjay Malhotra said that the central bank will implement the new Liquidity Coverage Ratio norms in phases, but not before March 31, 2026.

In July 2024, the RBI had proposed to tighten LCR norms by increasing the run-off factor for retail deposits. This action was taken keeping in mind the rising number of mobile and internet banking users.

Merchant bankers are expecting that financiers, such as PNB Housing Finance, Shriram Finance and Cholamandalam Investment and Finance Co. to line up their offshore debt offerings in 2025.