The $1-billion loan agreement between the Japan Bank for International Cooperation and the State Bank of India for supporting Japanese automobile companies in India will largely benefit Maruti Suzuki, which has already formally applied for finance, senior Japanese officials have said.
“The loan agreement will not only help manufacturers, but also suppliers, dealers and auto loan providers. It will help to boost demand in India to buy these cars,” Shingo Miyamoto, Economic Minister, Embassy of Japan, told BusinessLine.
Of the $1 billion, $600 million will be financed by the JBIC and $400 million by other participating Japanese co-financers. The JBIC will provide a guarantee for the portion co-financed by the participating banks. The loans will be at rates cheaper than commercial interest rates, explained Toshihiko Kurihara from JBIC.
While Maruti Suzuki has enough financial soundness, many of its suppliers and dealers are facing problems in keeping the momentum of borrowings from client banks. “It happens in difficult financial situations. Some banks ask for repayments from units, especially MSMEs,” Kurihara said, adding that the loan agreement would also help such companies.
Auto manufacturing companies like Toyota and Honda may also benefit from the arrangement as many of the targeted suppliers also supply parts to these companies, Miyamoto said.
“We hope that this will give a boost to the Indian industry, because the auto industry has wide range of supply chains. The supply chain reaches to various parts of societies and there are many companies involved in the chain. So by supporting those companies that are included in supply chains as a whole, we hope it will positive thing for Indian economy. It will also support ‘Make in India’ initiative,” Miyamoto added.
Indian consumers, too, stand to benefit as a part of the finance will also be provided as consumer loans, the officials said. The arrangement also allows the funds to be used for financing consumer loans so the buyers of Japanese cars could get easier loans.
The loan agreement is part of the ‘Japan India Industrial Competitive Partnership’ launched last year to maintain and boost Indian competitiveness and enable diversification of Indian supply chain, Miyamoto said.
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