As much as $50.46 billion of external debt —- equivalent to nearly a quarter of India’s forex reserves —- is due to mature over the next 8 months.

That potential outflow could add immense pressure on the already hammered rupee in the short term, experts said.

But the $273.88 billion of foreign exchange reserves could act as a buffer, and the Reserve Bank of India (RBI) could use it to facilitate the process of repayments, they said.

Data released by RBI in June this year show $43.66 billion of short-term debt maturing by June 2009.

Short-term debt is predominantly trade credit, including buyer’s credit, or guarantees given by foreign banks to their Indian counterparts and used by Indian importers and exporters.

Additionally, commercial borrowings (ECBs and foreign currency convertible bonds) worth $6.8 billion will also mature by June next.

Economists said in normal times, a majority of these debts would get rolled over.
But these are abnormal times, so there is a risk foreign banks won’t roll over the credit limits and Indian banks will have to pay up.

Noted forex expert A V Rajwade said RBI will have to provide rupee liquidity to banks and also supply dollars to the foreign exchange market over the next few months to facilitate settlements.

“The $43.66 billion in short-term debt maturities is understated. RBI will have to provide support worth $70 billion or Rs 300,000 crore,” he told DNA Money.
This would require a massive restructuring of RBI’s overall assets as forex holdings would go down by that amount and there would be a corresponding increase in rupee assets, he said.