India eyes cheaper loans in yen, rupees

India is pressing multilateral development banks (MDBs) to lend more in Japanese yen and Indian rupees in an attempt to reduce borrowing costs and manage exchange rate risks more effectively, two officials aware of the matter said.

- Rhik Kundu & Utpal Bhaskar

New Delhi has steadily expanded loans and official development assistance (ODA) in yen to gain from ultra-low interest rates and the rupee's appreciation against the Japanese currency. Many of these loans finance infrastructure and development projects.

"Yen rates remain close to zero, and with the rupee having appreciated significantly against the yen since early 2023, yen borrowings, including through Samurai bonds, have emerged as a compelling option," one of the two officials cited above said, requesting anonymity. Samurai bonds are yen-denominated bonds issued in Japan by foreign entities to raise money.