Hyderabad : Some of the corporates have raised unsustainable amount of debt from various sources, including banks and overseas financial institutions, without showing any regard to domestic and global demand situation, RBI Deputy Governor S S Mundra said.
The obvious fallout of this indiscriminate borrowing is a severe deterioration in their ability to service debt, besides casting an adverse impact on banks’ balance sheets, he said, adding the banking system would be held partially responsible for this situation.
RBI Governor Raghuram Rajan had also expressed similar views recently when he said rich businesses owing large sums to banks should behave and not flaunt “massive birthday bashes” while still in serious debt.
Some of them may fall in the category of “ponzy borrowers”, he said, speaking at a conference. In India, about a third of corporate debt is owned by companies with a debt-equity ratio of more than 3, he said.
