Led by Reliance Industries, a clutch of corporates is swapping dollar liabilities into rupee while others like Saurashtra Cement and even Adani Exports have been planning to shift from FCNR (B) or external commercial borrowings (ECBs) to rupee loans.

According to industry sources, Reliance, Greaves, Arvind Mills and Ceat have entered into currency-cum-interest rate swaps with a new generation private bank to crystallise their liabilities into rupee loans. "These deals have taken place over the last four weeks. The companies are converting their ECB exposures to rupee term loans to save on borrowing costs in the fear that the rupee will decline," sources said. In terms of size, these are small deals. For instance, Reliance has swapped a $10 million worth of ECBs with a rupee term loan while ArvindMills swapped a $20 million worth of ECBs.

"These swap deals indicate a reverse trend and the corporates' views on the rupee. About two years back, Reliance entered into a swap deal with IPCL for converting its rupee liability into dollar. Now, it has changed its focus of money management," sources said.

Public sector banks have been flooded with corporate requests for converting FCNR(B) loans into rupee loans. "Corporates have been approaching us ... There have been a few instances of switching from forex loans to rupee loans," State Bank of India chairman GG Vaidya said. Senior executives of Bank of India and Bank of Baroda -- two public sector banks with a substantial FCNR(B) corpus -- also confirmed the trend. According to sources, Saurashtra Cement is converting its $10 million worth of ECB exposure into rupee loans.

Even those corporates which are net forex earners are also trying to get out of forex loans and convert their liabilities into rupee. A case in point is Adani Exports which hasapproached banks to convert its $5 million worth of FCNR(B) loans into rupee loans. "In case the rupee depreciates sharply, an exporter can make a handsome profit by selling the export proceeds in the market which is why even those corporates which have a natural hedge (against depreciation) want to shift to rupee loans," a forex dealer said.

The rupee has depreciated by almost 90 paise against the dollar in the last two months -- from 42.40 in April to 43.15 on June 18. Forex experts feel that the Indian currency will lose further ground steadily unless the border tension subsides. This is why most corporates have shelved their plans to borrow foreign currency loans, said the treasury head of a nationalised bank.

According to treasury heads of various banks, most corporates are not going in for ECBs as they find it cheaper to raise funds from the domestic market since public sector banks' prime lending rates are ruling at around 12 per cent. Triple-A rated corporates have an option of raising evencheaper funds through the commercial paper route.

"Even though forward premia are relatively soft, nobody is willing to take the risk of taking forex liabilities on their books," a senior banker said. With no taker for FCNR(B) loans, banks are also discouraging FCNR(B) deposits even though the country is keen to prevent any depletion of its forex reserves. Most of the banks have slashed FCNR(B) deposit rates with three-year dollar deposits now attracting five per cent interest.

"With virtually no FCNR(B) fund offtake in the domestic market, our foreign offices are deploying the corpus in overseas money market instruments," said a senior bank official.