All sources of local financing are available to foreign-participation companies incorporated in India, regardless of the extent of foreign participation. Under foreign exchange regulations, foreigners and non residents, including foreign companies, require the permission of the Reserve Bank of India to borrow from a person or company resident in India. The Reserve Bank of India lays down restrictions on bank lending and other activities with large companies. Most Indian banks are well behind foreign banks in the areas of customer funds transfer and clearing systems. They are hugely over-staffed and are unlikely to be able to compete with the new private banks that are now entering the market.
All commercial banks face stiff restrictions on the use of both their assets and liabilities.
The Indian rupee is freely convertible on the trade account. Availability of Financing U.S. firms seeking rupee loans from Indian banks will encounter high interest rates. Some companies have found themselves locked in to such loans when banks have refused to accept pre-payment. Bank employee unions have consistently fought banking automation, with the result that most branches of SBI and other public sector banks still use hand-written ledgers and count currency by hand for every transaction. For the past several years, multinational companies looking to their home markets for affordable project financing have been stymied by RBI guidelines which mandate that equity inflow be balanced by export earnings.