The obvious fallout of this indiscriminate borrowing is a severe deterioration in their ability to service debt, besides casting an adverse impact on banks' balance sheets, he said, adding the banking system would be held partially responsible for this situation.

RBI Governor Raghuram Rajan had also expressed similar views recently when he said rich businesses owing large sums to banks should behave and not flaunt 'massive birthday bashes' while still in serious debt.

"As we notice now, several indiscriminate corporate houses continued market borrowing with a view to increase their market share and to expand capacity without any regard to domestic and global demand situation," Mundra said here.

"An indirect outcome of higher corporate leverage is also likely in terms of poor transmission of monetary policy impulses as corporates may not be in a position to benefit from falling interest rates due to already high levels of debt," the Deputy Governor said.

According to him, a number of companies had borrowed heavily to set up infrastructure projects that have got stalled and subsequently faced cost overruns due to factors such as delays in receiving various clearances, cancellation of coal or gas linkages, protests from environmentalists.

Latest News  from Business News Desk