New Delhi: With the downgrade in credit rating to negative, Indian companies are expected to hit hard with fall in External Commercial Borrowings (ECB). The government is now preparing to deal with the situation by increasing inflow of domestic loans for the companies. Preparations for increasing liquidity into the banking system have already been started. 

According to sources, Reserve Bank of India (RBI) will soon be directed to make necessary arrangements. With the credit downgrade from stable to negative by Standard and Poor’s (S&P), loans from overseas market will get dearer and affect companies in India.

It is considered that during the mid quarter review in next month, the RBI may take decisions to enhance liquidity in banking system. Sources tell that the Finance Minister has already briefed the ministry officials for steps to increase liquidity.

The Deputy Governor of RBI, K C Chakrabarty has said in Hyderabad that RBI is assessing the situation. The Central Bank will release a report on financial state of economy in June. The report is expected to present clear picture of the economy. Detailed action will take place only after the release of report. But to provide temporary relief, immediate steps can be taken to facilitate loans for the companies.