Indian firms turn to euro, yen swaps to trim borrowing cost

INDIAN FIRMS ARE opting for cross-currency swaps to convert part of their debt into the euro or the Japanese yen in order to trim borrowing costs, said bankers.

- ANUPREKSHA JAIN

They anticipate a sharper fall in interest rates of these two currencies instead of the dollar.

While some are converting their rupee debt into the euro or yen, others are converting their dollar debt. With the easing of rates by the European Central Bank, the borrowing cost is expected to be reduced by 150-200 basis points over a few months, said bankers.

Cross-currency swaps are derivative structures that allow companies to convert loan principal, interest repayments, or both, from one currency to another, helping manage interest rates and forex risk.

"People are moving to the yen as its rate of interest is closer to zero. Also, the pricing of loans is better," said a head of treasury at a state-owned bank.