New Delhi: The Union Finance Ministry warned the companies which borrow heavy loans from abroad that they could lose their benefit in the wake of depreciation of rupee against the USD.

As per the report issued on Friday, Finance Ministry said, “The weak rupee against the USD has dented the benefit of the companies that have got exposure of the External Commercial Borrowings (ECB). Between end-March 2006 and end-March 2011, ECBs have registered a compound annual growth rate of 27.4 percent.”

The ECB has increased exponentially for the last 18 months due to higher domestic interest rates. Corporates resorted to ECBs to raise funds at competitive rates against the back-drop of high interest rate regime in the country.
The rupee has depreciated by 15-16 percent against the US dollar due to various external as well as domestic factors. The Ministry said that as of September end, India's external debt stock was USD 326.6 billion, an increase of 6.6 percent over USD 306.4 billion at the end of March.
"The rise in external debt is largely attributed to increase in external commercial borrowings, export credits and short term debt," the statement added.
Short-term debt accounted for 21.9 percent of India's external debt at end-September 2011, while the rest (78.1 percent) was long-term.
Component-wise, the share of ECBs stood at 30.3 percent in total external debt followed by NRI deposits (16.0 percent) and multilateral debt (15.0 percent).
The shares of Government (Sovereign) and non-Government in total external debt were 24.3 percent and 75.7 percent, respectively, at end-September 2011.
Further, the share of debt denominated in US dollar was the highest in country's external debt stock at 55.8 percent, followed by the Rupee (18.2 percent) and the Japanese Yen (12.1 percent).
As per the ministry data, country's foreign exchange reserves provided a cover of 95.4 percent to the total external debt stock at end-September 2011 while the cover was 99.5 percent at end-March 2011.
The ratio of short-term external debt to foreign exchange reserves stood at 22.9 percent at end-September 2011, as compared to 21.3 percent at end-March 2011.
"Other indicators of India’s external debt remain within manageable limits," the statement added.

JPN/ Agencies