Reserve Bank Deputy Governor SS Mundra today expressed concern over the high corporate sector leverage. “A major concern today in the global arena is the leverage of corporates, which has enhanced substantially in the last few years,” he said in a speech at a CII event here today.

He said if a company operates with less equity, it is like skating on thin ice.

“The leverage level should be like blood pressure in the body. It should neither be too high or too low. Both are injurious to health,” Mundra said.

It could be noted that the Financial Stability Report released by the RBI in June had also raised a red flag against rising corporate leverage.

Private corporates are responsible for most of the forex debt of the country which is close to $476 billion. They had raised more than $30 billion in overseas bond sales alone last year as the domestic interest rates remained high.

Many others converted their high-priced rupee loans into forex loans to save on interest cost, which is 5-6 per cent. As per RBI data, the country’s external debt as of March 2015 stood at $475.8 billion recording an increase of $29.5 billion, or 6.6 per cent, over its level in March 2014.

And most of this is external commercial borrowings by companies and non-resident deposits. The external debt to GDP ratio stood at 23.8 per cent as of March 2015, up marginally from 23.6 per cent in March 2014.

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