Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
5.India’s major power generator NTPC Ltd has raised ‘largest ever’ Samurai loan recently. In the light of this statement explain what is a Samurai loan? and where will the funds raised under it be used? (250 words)
Reference: Indian Express
Why this question:
India’s largest power generator NTPC Ltd has raised a $750 million-worth term loan in Japanese yen, claiming it to be the “largest ever” Samurai loan raised by any Asian corporate. Thus the question.
Key demand of the question:
The answer must discuss the concept of Samurai loans and their significance.
Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.
Structure of the answer:
Briefly explain what Samurai Loans are – Samurai loans allow non-Japanese firms to tap into the investment capital available in Japan and borrow funds in yen, which is among the currencies with the lowest interest rates.
Discuss in detail the concept – The cross border syndicated loan provides the borrower with capital to
either enter the Japanese market or the ability to convert the proceeds into
The firm’s local currency for use in existing operations.
- The loan was raised under the automatic route of RBI’s External Commercial Borrowing regulations and has been fully underwritten by the State Bank of India in Tokyo, Sumimoto Mitsui Banking Corporation in Singapore and Bank of India, Tokyo.
- The facility has a door-to-door maturity of 11 years — the period within which the amount would have to be paid back — under two tranches.
Conclude by reasserting the significance of such tools.