The subprime losses of international markets are a gain for Indian markets. With liquidity drying up in troubled international markets, banks are turning to the domestic markets to raise funds for their corporate clients.
Leading foreign banks have witnessed a slowdown of international syndication markets in the last six-seven months and are looking at raising resources through domestic bonds and debentures.
?The rates might have fallen a bit after the Fed has reduced rates, but there is no money in the international market,? said Vishwavir Ahuja, managing director & country manager of Bank of America, adding that BankAm can supply only limited resources from its own kitty and has to depend on syndication to meet the larger capital needs of India Inc.
Gunit Chadha, managing director and chief executive officer of Deutsche Bank India agrees with Ahuja. ?The ECB window has gone dry. Our onshore business in India has got a boost as global depository receipts (GDRs) have slowed down. Today our business model is to not just develop the cross border business but also focus largely on domestic activities,? Chadha said.
According to Prakash Subramanian, MD & regional head of capital markets, South Asia with Standard Chartered Bank, ?There is a lot of short-term borrowing programmes by Indian corporates in the domestic market since spreads on credit instruments have blown out abroad. The marked-to-market losses have been higher for banks. Hence, they have moved over to the local currency.? He said Standard Chartered too has seen a relative shift in its business model towards onshore activities.
Subramanian feels the tightness in the international market would persist for a quarter or two. Jamal Mecklai, CEO of Mecklai Financial and Commercial Services, say many companies are delaying their borrowing plans. ?Earlier, companies used to borrow money from abroad as credit was cheaper there. But today, the scenario has changed. One can raise money from abroad only when the global crises subside. RBI constraints on ECBs also prevail. As a result, most Indian corporates have delayed their borrowing plans,? he said.
An industry source said the Tata group?s fund raising plan globally is also getting delayed from the subprime turmoil.
Last year, to curb rupee?s appreciation from capital inflows, RBI imposed restrictions on external commercial borrowings.