ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Ramesh JangiliSubscribe to Ramesh Jangili

Bank and External Borrowings of the Corporate Sector

Large Indian corporate firms went on a borrowing spree abroad a few years ago attracted by the lower interests that came on external commercial loans. But sluggish profitability and currency depreciation are making it difficult for the firms to meet repayment obligations. In domestic borrowings, the corporate stress has led to higher non-performing assets of banks but there has been no sign of systemic risk to the banking sector.

Determinants of Private Corporate Sector Savings: An Empirical Study

The private corporate sector, characterised by a stagnant savings rate until 2002-03, has recently emerged as the category experiencing the most rapid growth of savings in the country. This has contributed to the increase in India's overall savings rate. Using firm level data of public limited companies for the period 1998-99 to 2006-07, this paper employs a random effects model to study the determinants of private corporate sector savings. The empirical results of the panel regression indicate that corporate tax rate, availability of external funds, cost of borrowings, interest burden and value of production as a percentage of manufacturing expenses are the major determinants of corporate savings during the period. Dividing the sample into large and small firms based on their sales in 2006-07, we find that the significance of determinants varies considerably between these two firm groups.
Back to Top