The Japan Bank for International Cooperation, a public financial institution and export credit agency signed a loan agreement of $600 million (Rs 4,440 crore) on October 27 with the State Bank of India (SBI). This loan is intended to provide, through SBI, the funds necessary for the manufacturing and sales business of suppliers and dealers of Japanese automobile manufacturers as well as for the provision of auto loans for the purchase of Japanese automobiles.
The loan is co-financed with Sumitomo Mitsui Banking Corporation, MUFG Bank, Mizuho Bank, the Shizuoka Bank, and the Bank of Yokohama. The total co-financing amount is $1,000 million (Rs 7,401 crore). JBIC will also provide a guarantee for the portion co-financed by the private financial institutions.
According to JBIC, India the world's 5th largest automobile market in FY2019 in terms of the units sold, is expected to grow further, and Japanese OEMs account for the majority share in India. The country is, therefore, an important market for Japanese automakers to expand their business overseas. However, with the economic activities in India stagnating due to the Covid-19 pandemic, and further expected to hinder the growth of automobile sales. The loan is aimed to help promote smooth funds flows for the whole range of business operations of Japanese automobile manufacturers in India, from production to sales, thereby serving to maintain and improve the international competitiveness of Japanese industry.
JBIC says the he government of India is striving to stimulate domestic manufacturing with its ‘Make in India’ initiative, and the automobile industry is the core of such manufacturing. Also, in response to the COVID-19 pandemic, the government of India announced economic measures for local, small and medium-sized enterprises, and this financing will assist these measures as well.
As Japan's policy-based financial institution, JBIC says it will continue to support improvement of Japanese companies' business environment in India by drawing on its various financial facilities and schemes and performing its risk-assuming function.