Indian banks have come forward to assist domestic companies in honouring their repayment commitments to European lenders.
The domestic lenders are also exploring opportunities to buy some of the loan portfolios directly from the European banks, which are under stress because of the sovereign debt crisis in that region.
The crisis in the euro zone has raised fears that most lenders in that region will not be able to roll over their loans. That would lead to huge redemption pressure on Indian companies this calendar year.
The finance ministry, however, played down these concerns. Economic Affairs Secretary R Gopalan said data provided by the Bank of International Settlements (BIS) did not cause any concern.
Quoting BIS's June 2011 data, Gopalan said, "India owes a total of $206 billion to other countries, of which European banks' exposure is only $18 billion."
Bankers and economists agreed. "It is a concern but it is not a crisis-like situation. Banks in the UK and Switzerland, which have long-standing relationships with Indian companies, are more immune to deleveraging pressures. Hence, there will not be a massive redemption pressure on Indian companies and domestic banks will have the capacity to assist them," said a senior official of a foreign bank in India.
Gopalan said the total FCCB/ECB repayment liability in 2012 was $20 billion. Similarly, total trade credit was $18-19 billion and only 10-12 per cent of the amount originated from Europe, he said. The total amount others owed India was $36 billion and the share of European entities in it was $2.4 billion.
However, according to the Bank of International Settlements website, consolidated foreign claims on India were estimated at $325 billion as on June 30, 2011, of which European banks accounted for $148
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