External commercial borrowing

Type :

Theses

Pages :

31 pages

Format :

.doc

Published date :

03/26/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
1. External Commercial Borrowing (ECB)
2. ECB schemes
3. Methods of raising ECBs
4. Concept of Withholding Tax
5. FCNR (B) loans
Framework of the study
1. Hedging mechanisms for the foreign currency borrowing
2. Currency derivative contracts
3. Interest rate derivatives
Cost of loans in different currencies
List of the companies that have raised ECBs
Bibliography
Conclusion

Abstract

The basic objective of the research project is to explore all the possible sources of raising a foreign currency loan and compare the cost advantages for the corporate on raising such a loan. The project also studies the available hedging mechanisms for the borrowing corporate; to protect it from the various risks that they are exposed to, on taking a foreign currency denominated borrowing.

In Part- I of the project the various regulations issued by the RBI regarding ECBs have been brought forward. The various alternatives available with a corporate for raising a foreign currency loan have been stated and an attempt is made to thoroughly understand these products along with their regulatory issues.

In Part- II of the project, the various risks attached to the foreign borrowing have been brought forward and all the possible derivative contracts available for an Indian corporate to hedge these risks have been studied, in the light of the guidelines issued by the RBI, making hedging mandatory for all foreign currency denominated borrowings by the corporate. This part gives an understanding of the derivative products and their regulatory issues.

In the Part- III of the project, recommendations have been given as to which borrowing currency will give the maximum cost benefits vis-à-vis the Indian rupee borrowing with a comprehensive cost comparison. Recommendation has also been given for the nature of the risk to be hedged.