The Telegraph
Monday , November 28 , 2011
Since 1st March, 1999
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Foreign loan hiccups

Mumbai, Nov. 27 (PTI): Debt syndication for raising foreign loans by domestic companies or financial institutions has been witnessing a drop of late as foreign banks reduce their exposure to emerging markets on the back of the ongoing Eurozone debt crisis.

Further, a depreciating rupee is acting as a dampener to raise foreign currency loans through the external commercial borrowing (ECB) route by domestic entities.

“Certainly, some foreign banks are not participating strongly in the debt syndication market as they were in the past. The availability of syndication has shrunk a little bit,” HSBC India chief executive Stuart A. Davis said.

He also said that because of the lack of syndication opportunities, the price has been impacted in the recent past.

In a debt syndication process, there is a consortium of banks or financial institutions or entities that extend loans to a particular firm with a lead bank or financial institution taking the highest exposure.

Recently, domestic financial institutions have seen a drop in debt syndication opportunities as cash-starved banks in advanced economies are reluctant to take exposure to emerging economies because of the ongoing economic uncertainty in their home markets.

“Raising funds through syndicated loans has turned costlier as most foreign banks have frozen or reduced their lending abroad due to the Eurozone crisis,” S.J. Balesh, senior director for resources at Infrastructure Development Finance Corporation, said.

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