MUMBAI, July 7: The external commercial borrowing (ECB) route which affected the demand for credit from domestic banks and financial instititons is still attractive to Indian corporates, according to K Ostubo, chief executive officer, Sumitomo Bank.

Even after the reduction of bank rate by one percentage point to 10 per cent, the difference between the domestic interest rate and global rate is around 5-6 per cent prompting several Indian bluechips to seek ECBs. ``In spite of an exchange rate risk, plenty of companies are still interested in going for ECB,'' he told The Indian Express.

``We are talking to Fuji Films, Jindals, Lupin Laboratories, Ranbaxy, Larsen & Toubro and the Government of Maharashtra to arrange ECBs. Out of an estimated $ 2.6 billion credit the bank to the Maharashtra government, the bank is financing $ 1 billion.

The remaining $ 1.6 billion is coming from the World Bank and Overseas Economic Cooperation Fund of Japan. The bank's total exposure to Indian government and corporates is $ 110 billion,'' Ostubo said.Sumitomo Bank Ltd, the second largest bank after Mitsubishi Bank in the world, has assets of $ 528 billion as on March 1996 and ranked top Japanese bank as a syndicated loan arranger. ``Even if we did not have a full- fledged Indian branch, we have been active in the Indian market. We have been arranging and lending foreign currency loans to various Indian companies like Nalco, Air India, IDBI, ICICI, TELCO and TISCO,'' he said.Sumitomo Bank is planning to float a subsidiary for capital market operations in India. As per the Japanese Ministry of Finance norms, Japanese bank branches in India are prohibited from dealing in the stock markets. ``If a Japanese bank wants to operate in the Indian stock exchanges, it will have to float a seperate finance company as subsidary registered in India,'' Ostubo said. The bank opened a full-fledged branch in Mumbai recently.He felt that Japanese investors are very conservative in taking economic decisions. ``But once they have decided to enter the Indian market, they will not retreat. Various Japanese companies are entering the Indian market. National Panasonic, Toyota, Nippon and Sumitomo Heavy Industry are planning huge investment in India. Sumitomo Bank had a Bombay branch about 80 years ago, but this was closed due to sudden drop of cotton business and the stop of exchange between India and Japan. The re-entry of Sumitomo Bank in Mumbai is on the basis of increasing interest shown by Japanese customers in the Indian economy,'' Ostubo said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.