New Delhi, Jan. 27: Citing higher foreign exchange reserves, the government today said it has decided to prepay around Rs 14,015 crore (around $ 2.8 billion) worth offshore debt owed to the financial institutions.
“We have decided to repay prematurely two ADB and World Bank loans for $ 1254 million and $ 1549 million respectively in the current financial year...this will be advantageous to the country,” the government said in a statement.
The statement said the debt repayment will be financed through domestic government borrowings. The country has a record $ 72.4 billion of forex reserves which has been rising due to trade and foreign investments and a strong inflow of dollar from expatriate Indians.
“This is the first time that the finance ministry is repaying an external debt of this size—swapping fixed rate foreign currency debt with fixed rate rupee debt,” the statement said.
Earlier, in the morning, the government denied reports that it was seeking a dollar-denominated loan to repay its foreign debt. “Nothing at all; we do not need any money,” finance secretary S. Narayan had clarified.
BasisPoint, a debt market newsletter, quoting banking sources had said the country was considering two options: an “external commercial borrowing” that would be syndicated and a long-dated offshore bond.
“The Indian government is eyeing a 10-year loan with an amortising repayment schedule,” BasisPoint said.
The newsletter also said the proposed deal worth around $ 2.5 billion has generated considerable interest among major arranging banks in Asia and that senior syndicators from several banks were in the country last week to discuss the transaction.