Bankers see FX loan refinancing boosting private investments

Published On: 06, Dec 2017 | Source:


Leading bankers have welcomed the Reserve Bank decision to allow banks to refinance forex debt of high-rated domestic corporates saying it will help retain quality borrowers besides boosting private investments which have been lagging for many years now. Terming the RBI policy, wherein it has left the key rates unchanged as “pragmatic,” they said the policy stance reflects the ground reality well as it balances out the higher likely growth with a marginal uptick in inflation as well. “The decision to allow overseas subsidiaries of domestic banks to refinance AAA-rated corporates will provide a fair and just opportunity to banks to book and retain good quality assets,” SBI chairman Rajnish Kumar said.

RP Marathe, MD of Bank of Maharashtra, chipped in saying allowing overseas branches/subsidiaries of domestic banks to refinance the forex loans of AAA-rated companies by raising fresh ECBs “is going boost private investment.” Kumar further said the status quo on policy rates was on expected lines and that the policy assessment is fairly balanced and pragmatic with inflation and growth both expected to show an uptick in the next two quarters.

Chanda Kochhar, managing director and chief executive at ICICI Bank, said policy stance “displays RBI’s prudence in highlighting the adverse risks to the inflation trajectory. “It also takes into cognizance of further improvement in growth prospects on account of various structural reforms, including bank recapitalisation.” Welcoming the greater clarity on the liquidity framework, she said it indicates that RBI is ready to deploy both short-term and durable tools to absorb or inject liquidity as the need arises.

Bank of India managing director Dinabandhu Mohapatra welcomed the merchant discount rate rationalization and permitting overseas subsidiaries of domestic banks to refinance ECBs of AAA-rated companies. Bank of Maharashtra’s Marathe said rationalisation of MDR will give a boost to cashless economy especially for transactions via debit cards. Chandra Shekhar Ghosh of Bandhan Bank said the neutral policy stance means, future data flow will determine the central bank’s action going forward.