Over 65 per cent of the debt, or Rs 1,24,923 billion was raised from overseas markets through bonds, foreign currency convertible bonds and syndicated loans.  The cost of funds raised overseas works out cheaper compared with domestic debt or loans. Savings, in terms of interest rate, is about 200 basis points after fully hedging the risk of rupee depreciation.

With interest rates rising further and banks now wanting to move closer to an end to sub-PLR lending, companies are likely to increase their dependence for funds on the overseas markets to try and keep average interest costs in single digits.

A large part of banks' overseas borrowings was because of their need for raising Tier I capital through perpetual debt and for Tier II capital through long-term bonds.

Of the $28.71 billion raised overseas in 2006-07, $18.13 billion was through syndicated loans, $4.50 billion through FCCBs and another $6,081 through bond issues. A total of Rs 68,900 crore (Rs 689 billion) was raised through domestic bonds in 2006-07 against Rs 59,700 crore (Rs 597 billion) a year earlier.