Banks and financial institutions are tapping the external commercial borrowing (ECB) market for raising short-term funds even though the government is yet to finalise its policy on ECBs for the new financial year.
The overseas loan arrangers are not restricting themselves to only loan arrangement. They are offering factoring services as well for their ECB clients as a structured trade finance facility. A case in point is ING Vysya. Bankers said ING Vysya has agreed to buy out the export receivables of United Phosphorous worth Rs 100 crore.
While United Phosporous is an ECB borrower for the bank, the receivables to be bought back by the bank are insured by ICICI Lombard and reinsured by Qbe, Australia.
These facilities will gradually become a trend as margins for ECBs come under pressure with rising interest rates.
