Supporting Japanese Exports to India through State-Owned Commercial Bank First Global Bank Loan to Take Corporate Risk in India, Focus of Attention as One of the BRICs
NR/2005-62
December 20, 2005
December 20, 2005
- Japan Bank for International Cooperation (JBIC; Governor: Kyosuke Shinozawa) signed today a bank-to-bank loan agreement totaling up to the equivalent of about 5 billion yen with the Bank of India (BOI), a state-owned commercial bank in India.*1 While the loan, cofinanced with Mizuho Corporate Bank, is in principle, denominated in Japanese yen, it may be provided in US dollars as well, if it is necessary to support exports of Japanese firms.
- The loan provides medium- and long-term funds for Indian firms by establishing a credit line for BOI to help them import machinery and services from Japanese exporters. Since the credit line may be denominated in US dollars as well as Japanese yen, it will be useful for Indian firms and will promote purchases by them of Japanese goods and services. This will lead to more extensive Japanese exports to India, which will enhance the competitiveness of Japanese firms in the Indian market.
- Since adopting economic reform policy in 1991, India has registered robust economic growth. Given the fact that its real GDP grew by 6.9% in 2004 and is forecast to again grow around 7% in 2005 and thereafter, India is attracting attention as one of the BRICs. There are prospects for a further increase in demand for investment in plant and equipment as India looks toward sustainable development. Against this background, during his official visit to India in April 2005, Prime Minister Koizumi and Prime Minister Manmohan Singh of India decided to strengthen the Japan-India Global Partnership through an Eight-fold Initiative. The Initiative, which comprises measures to increase the breadth and depth of trade and economic cooperation between Japan and India, has raised expectations for further expansion and diversification of bilateral trade. Meanwhile, there is a marked increase in business transactions with India among Japanese firms. Moreover, the growing level of attention focused on India was indicated by the results of "Japanese Manufacture's Overseas Business Operation 2005", an annual survey conducted by JBIC. It ranked India second, following China, as a promising country for business development.
- This is the first export loan to India since 1999, after a 6-year hiatus. This is also the first export loan relying solely on the borrower's creditworthiness rather than on an Indian government guarantee, since the Indian government has an explicit policy of not providing guarantees. However, considering the high level of expectation for India as a new destination for business development of Japanese firms, JBIC has this time decided to provide credit by assuming the corporate risk of BOI to support the expansion of export business by Japanese firms focusing their attention on India.
- *1 A bank-to-bank loan is extended to importers by way of a financial institution in the importing country to finance their purchase of Japanese machinery and equipment.
