Indian companies will find it difficult to raise funds from the overseas market due to the impact of US sovereign debt rating downgrade by Standard and Poor's on global financial market, the Reserve Bank of India (RBI) has said.
Several lenders and financial institutions including Rural Electrification Corporation (REC), IDBI Bank, Bank of India and Indian Bank have already postponed their overseas offerings, said a central bank note on impact of rating downgrade on India.
RBI further said that its decision to relax the norms for repayment of Foreign Currency Convertible Bonds (FCCBs) may not yield the desired results.
"The relaxation in ECB (external commercial borrowings) guidelines offered by the Reserve Bank for repayment of... liabilities (by companies) may not be as useful as foreign sources might dry up," the note to the Sub-Committee of Financial Stability and Development Council (FSDC) said.
In May, RBI had raised the overall limit for ECBs to $30 billion from $20 billion for the current financial year, a move seen as a breather for corporates battling high interest rates.
Earlier this month, S&P downgraded the US government's 'AAA' sovereign credit rating — a development which raised concerns that investors will lose confidence in its economy.
As per the note, the outstanding of trade credit and loans is about USD 205 billion as on March 31, 2011, as per India's International Investment Position.