2 weeks ago
PSU non-banks slow offshore borrowing as cost edge shrinks
The Reserve Bank of India created a special deal to help government-owned companies borrow money from other countries more cheaply.
This deal was supposed to save them money.
But just about seventy days later, the savings are almost gone.
This happened because US government bonds now pay more interest.
Also, many Indian banks are rushing to borrow dollars, which makes it more expensive.
Now the cost of borrowing overseas is only a tiny bit cheaper than borrowing in India.
The difference is only 8 to 10 basis points, which is a very small amount.
Because of this, these companies are not rushing to borrow from other countries.
They are thinking about whether to borrow now, wait for better rates, or just borrow in India instead.
The RBI's concessional hedging window was expected to make overseas borrowing attractive for public sector companies.
Seventy days on, the advantage of offshore borrowing is already wearing thin.
Higher US Treasury yields and a rush of Indian banks into the dollar market have narrowed the cost gap with domestic bonds.
The cost gap with domestic bonds now stands at just 8-10 basis points.
Public sector NBFCs are weighing whether to borrow overseas now, wait for better rates, or stay home.
The assessment was based on inputs from two PSUs and two merchant bankers.
- Who
- Public sector non-banking financial companies (NBFCs) in India and the Reserve Bank of India
- What
- PSU non-banks are going slow on offshore borrowing as the cost advantage over domestic bonds shrinks
- Where
- India, reported from Mumbai
- When
- Seventy days after the RBI introduced its concessional hedging window
- Why
- Higher US Treasury yields and a rush of Indian banks into the dollar market narrowed the cost gap to just 8-10 basis points
Key facts
- Event
- PSU non-banks slow offshore borrowing
- RBI measure
- Concessional hedging window for overseas borrowing
- Time elapsed
- 70 days since the window was introduced
- Cost gap vs domestic bonds
- 8-10 basis points
- Key factors
- Higher US Treasury yields; rush of Indian banks into the dollar market
- Options being weighed
- Borrow overseas now, wait for better rates, or stay home
- Sources
- Two PSUs and two merchant bankers
- Report location
- Mumbai










