The Reserve Bank of India (RBI) recently issued a curious circular to all banks in India. It barred banks with overseas operations from giving foreign currency loans to Indian companies. It has also stopped them from providing Indian companies with guarantees that help raise loans from other overseas banks, so that they can repay outstanding rupee loans in India.What’s intriguing about this notification is that it revokes a 2012 decision, which allowed Indian companies to raise money overseas to repay rupee loans.
No external debt crisis, please
The Hindu Business Line republished an article by Gateway House's Senior Geoeconomics Fellow Rajrishi Singhal examining the Reserve Bank of India's move barring banks with overseas operations from giving foreign currency loans to Indian companies.