India, Japan hold finance talks, discuss bilateral cooperation and international issues | Mint

The second India-Japan Finance Dialogue held in Tokyo last week was attended by top government officials and regulators, which discussed cooperation in third countries, international issues and reached consensus on promoting financial cooperation and strengthening bilateral ties, the Finance Ministry said on Monday.

Japan’s Deputy Minister of Finance for International Affairs Atsushi Mimura and Secretary of the Department of Economic Affairs Ajay Seth led their delegation.

The delegates included representatives from the Ministry of Finance and Financial Services Agency from Japan and Indian representatives from the Ministry of Finance, Reserve Bank of India, Securities and Exchange Board of India, Pension Fund Regulatory and Development Authority, Insurance Regulatory and Development Authority of India, and International Financial Services Centres Authority.

What was discussed?

“The participants exchanged their views on the macroeconomic situation of the two countries. They discussed cooperation in third countries, bilateral cooperation and international issues,” the Finance Ministry said in a statement.

“The participants also exchanged views on financial sector issues, including regulation and supervision, financial digitalisation and other policy initiatives in the two countries. The participants were also joined by representatives from Japan’s financial services industry in a session where various financial regulatory issues were discussed with a view to further expand investments in India,” it said.

The next round of talks will be held in New Delhi.

Interestingly, the Bank of Japan raised its interest rate for the second time in 17 years last month, marking another step away from its long-term ultra-loose monetary policies, raising the interest rate from 0-0.1% to 0.25%.

In recent times, Indian companies and the government have become more reliant on Japanese loans to raise funds due to low interest rates.

However, the Bank of Japan has played down the possibility of a near-term increase in borrowing costs.

Among Indian companies, JSW Steel, Rural Electrification Corporation (REC), Power Finance Corporation (PFC) and Housing and Urban Development Corporation (HUDCO) have cumulatively raised loans worth more than 200 billion yen (about 1.5 billion yen). As per publicly available company disclosures, the company’s revenue in the previous year was Rs 11,000 crore.

These include loans as well as bonds. The largest of these was REC, which raised about ¥153 billion ( 8,390 crore rupees) will be available on three different loan facilities from January 2024.

Among state governments, Tamil Nadu this April opted to take a $300 million loan in Japanese yen from the World Bank to develop urban water and sanitation services.

Last month, state-run Power Finance Corporation announced that it had secured a long-term loan of JPY 25.5 billion from the Japan Bank for International Cooperation (JBIC) to finance a 300.3 MW wind power project in Karnataka.

Housing and Urban Development Corporation, another major public sector lender, recently signed up for yen-denominated ECB (external commercial borrowing) worth $400 million.

While India’s external debt-to-GDP ratio is 20%, one of the lowest among major economies, about 11–12% of the country’s external borrowing is from Japan, making it one of India’s largest bilateral lenders.