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Finance

Japan's syndicated loans to India climb 20%

Regional banks flock to capture demand for low-cost financing

A JSW Steel mill in southwest India: The steelmaker is among the borrowers to receive a syndicated loan from Japanese banks last year. (Photo courtesy of the company)

TOKYO -- Japanese lenders extended $1.53 billion in syndicated loans to Indian companies in 2019, up a fifth on the year, as yield-starved banks captured booming demand for low-cost financing.

India is now the second-biggest home to so-called samurai and ninja loans, trailing only the U.S. figure of $3.47 billion, figures from Refinitiv show. The Indian scale has increased by more than 10 times since 2017.

Low interest rates back home have led Japanese regional banks to increasingly invest in Indian syndicated loans to improve portfolio returns. Solid Indian credit ratings have bolstered the trend.

Meanwhile, funding demand from Indian corporations has grown amid looser rules governing lending from foreign sources. Yen-denominated loans also offer lower interest rates than dollar-denominated loans.

A syndicated loan is made by multiple lenders to limit exposure by a single bank.

Japan's Mizuho Bank has been behind major loan packages. The core Mizuho Financial Group unit has been holding information sessions in Japan for Indian companies and providing intelligence to investors.

Mizuho put together about 12 billion yen ($110.7 million) in yen- and dollar-denominated loans for India's JSW Steel last September. The Development Bank of Japan participated, along with Japan's Nanto Bank and Kiyo Bank.

That June, Mizuho and fellow megabanks Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group bundled about 33 billion yen in financing for Indian state-owned enterprises.

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