Dlr swaps can lower top 500 cos’ interest burden by Rs 7000 cr


MUMBAI, Apr 16: The forex swap window opened by

the central bank can potentially ease the interest costs for

the industry and can potentially help top 500 borrowers of

foreign funds save up to Rs 7,000 crore as the issuances

increase, says a report.

The Reserve Bank had on March 26 conducted the first

of forex swap auctions raising USD 5 billion promising to pay

back in rupees in return, that softened the rupee-USD forward

rates. It has announced another similar issue on April 23.

“The recent softening of the rupee-US dollar forward

rates, if sustained at least in the foreseeable future, is

likely to provide a fillip to borrowers that plan to raise

foreign currency-denominated capital,” India Ratings said in a

report Tuesday.

It said the first round of the three-year swap auction

along with a change in the global monetary policy conditions,

has moderated the three-year cross-currency swap rates by 0.30

percent on April 15 from the January 2 levels.

In the same period, the rupee-dollar forward premia

moderated by 0.71 percent, driven by a marked improvement in

the dollar liquidity conditions in the domestic market, the

report noted.

The agency estimates the interest outgo of the top-500

debt-heavy corporates can cumulatively come down by Rs 4,000-

7,000 crore, assuming a 0.50-0.75 percent reduction in the

cost of forex borrowings and a 0.5-2 per cent rise in the

share of forex borrowings in their outstanding debt.

The RBI swap windows will make available additional

deposits of about Rs 69,000 crore to the banking sector, it

said, adding however, the swap is unlikely to materially

change the aggregate banking system liquidity shortfall.

On the lack of transmission of RBI’s policy moves into

lending rates for borrowers, it said a weak accretion of

deposits has hurt and it is imperative to create substantial

quantum of fresh deposits in the system.

For a meaningful traction in deposit growth, both

endogenous and exogenous factors such as flow of foreign

capital should continue to contribute in a sustainable manner

over the near to medium term, it said.

The report pegs non-food credit growth will clock Rs

11.68 lakh crore in FY20 and the deposit shortfall will be Rs

2.79 lakh crore even after proceeds from the swap window and

an increase in credit-deposit ratio. (PTI)