New Delhi, July 2 -- The Reserve Bank of India's (RBI) concessional forex swap facility will reduce funding costs for government-owned financial institutions and is likely to prompt an increase in their external borrowings, S&P Global Ratings said in a report on Thursday.

The RBI announced the facility last month to encourage public sector undertakings to raise external commercial borrowings until 30 September. Under the scheme, the RBI will offer a concessional premium of 1.5 per cent per annum on fixed US dollar-Indian rupee swaps for three to five years on ECBs raised by public sector companies.

In its report titled 'Indian Government-owned Financial Institutions: The RBI Swap Effect will Increase Offshore Activity', S&P said the swa...