A study on foreign currency funding option

Type :

Research papers

Pages :

35 pages

Format :

.doc

Published date :

05/20/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
A study on foreign currency funding option
1. Background of the Study
How was foreign currency funding option introduced?
1. Source of foreign currency funds for bank
2. Deployment of foreign currency funds by the banks
Advantages of foreign currency funding
An overview of Export Bill Rediscounted (EBR) Scheme
Design of the study
Scope of the study
Need of the study
Objectives of the study
Profile of the industry
1. History of banking in India
2. A study of banking reforms in India
Analysis and interpretation
Graphs and interpretation
Conclusion
Bibliography

Abstract

Globalization of economy has resulted in interlinking of financial markets in different countries into a common worldwide pool of funds to be accessed by borrowers and lenders alike. No sector of the economy seems to be more global in its orientation and operations than finance. To succeed in an increasingly competitive environment, companies have widened their operations to produce and sell goods across a wider spectrum of markets. This resulted in active trade and economic activity.

After the globalization, cross-border controls on movement of capital, technology, goods etc., were lifted. Consequently, reforms in trade, industry, and financial and other sectors were initiated. foreign technology, goods and capital started flowing into the country posing a serious challenge to the high cost domestic industry in terms of technology, quality of resources, productivity, and price-competitiveness.

It has become imperative for the domestic companies that they should achieve technological and scale of operations parity with global competitors for sheer survival. The grossly underdeveloped state of our infrastructure facilities like power, transport, communications etc. could not obviously support this mammoth effort.

Companies need finance to import capital goods, raw materials, technology and services. They also require finance at the pre-shipment and post shipment stage of export. These credits should be available to the companies at very competitive rates of interest to compete in international markets.

The domestic financial market is beset with number of problems. First of all the money is not enough to support large capital-intensive projects. The capital market is rather shallow. Secondly the cost of capital is very high with real interest (inflation adjusted nominal interest rate) ruling far above the global levels. Thirdly, the domestic banks have meager capital base and are plagued by high NPA levels. Domestic banks suffer from structural deficiencies, poor asset/ liability management etc.

Therefore, the cost of their intermediation is very high which they are able to meet by keeping large spreads on loans. The domestic market has a limited product range. With a view to give level playing field to the companies, Government of India came up with the necessary regulatory measures to help the Indian companies to have easy access to foreign capital at a much cheaper rate of interest.