A quick study of the top 50 corporates in India reveals that these large companies have successfully reduced debt by Rs.60,000 crore in the first half of this fiscal year ending on September 2019. Clearly, this is part of a conscious strategy to deleverage their balance sheet. The same companies had reduced their debt burden by about Rs.43,000 crore. This clearly underlines that the large Indian companies have been quite aggressive and proactive in reducing their debt levels.

Most of the large Indian companies now prefer to raise funds through alternative instruments like external commercial borrowing (ECB), which gives funding at a lower rate comparatively. In addition, the debt management has also become difficult with the implementation of the new legal framework for debt resolution, including Insolvency and Bankruptcy Code (IBC). As a result, most of the large corporates would rather play it via the bond markets or the international markets. That is evident from the fact that the foreign borrowings of Indian companies doubled to $3.41 billion in October over the corresponding month a year ago. Of the total money borrowed by the domestic companies, USD 2.87 billion was through the automatic route of ECB, and $538 million came in through the approval route.

There are some worries in credit growth at the bank level. As per the latest RBI annual report, consumer credit has been growing but wholesale credit growth has been edging lower as companies and financial intermediaries are deleveraging to improve their business practices. For example, for October 2019 non-food bank credit grew by just 8.3%, with credit growth to industry segment negative at -3.4 per cent but retail loans rising to 17.2%. That is surely creating a headache for the banks.