Although refinancing of Rupee loan by ECB is generally not permitted, Indian companies in the infrastructure sector have now been allowed to utilize 25 per cent of the fresh ECB raised by them towards refinancing of the Rupee loan/s availed of by them from the domestic banking system, under the approval route, subject to certain conditions specified by the Reserve Bank.
For a majority of large European banks in the test, higher interest rates would lead to largely contained risks and also a higher net interest income in three years’ time. An interest rate hike therefore poses individual challenges for banks and requires individual remedies. Problems caused by the monetary policy change particularly in the US are, of course, not confined to financial institutions.