Tata Steel Ltd. has plans to raise nearly 260 billion rupees ($4.7bn) in loans from banks on an interest rate of around 11.25 per cent to fund its new mill, two people familiar with the situation revealed.

Speaking on the condition of anonymity, the people said that the syndicated project finance loan would most likely be for a period of more than eight years and would be disbursed in phases.

If the information is authentic, it shows that Tata Steel is trying to tap credit at home as debt crisis is still persistent in Europe.

Paritosh Kashyap, executive vice president of Kotak Mahindra Bank Ltd. in Mumbai, said, "Tata Steel may find that the domestic market is giving them more value for a loan of this size and tenor."

According to Kashyap, the Indian market is deep enough to help absorb this huge borrowing.

In the past year, Indian rupee shed 18 per cent of its value, suffering the worst performance among eleven Asian currencies. Yesterday, India's rupee enjoyed a slight gain of 0.3 per cent to 55.575 against the US dollar.

Deepening debt crisis in Europe has been weighing on Tata Steel's European operations for quite a long time. Earlier this month, Moody's Investors Service slashed the credit rating for Tata Steel's European operations to junk. Standard & Poor's also lowered the outlook to negative.