China's three largest commercial banks, the Industrial and Commercial Bank of China, China Investment Bank and the Export-Import Bank of China, secured US$1.2 billion in loans to Reliance Communications, India's second-largest mobile carrier.

Reliance will use the loan to pay off its convertible debt due on March 1.

This was the second time that the Indian telecom giant obtained loans from Chinese financial institutions. Reliance Communications borrowed US$1.93 billion from China Development Bank to refinance a short-term debt in December 2010, according to a Financial Times report.

Higher interest rates and a weaker rupee have imposed a heavy burden on Reliance's companies, leaving them scrambling for financing channels.

Yet, analysts say the loans constitute considerable risk for the Chinese lenders during a time most institutions are tending to be risk-averse.

Reliance has established a close rapport with Chinese companies. As early as October 2010, it purchased up to US$10 billion worth of electrical equipment from Shanghai Electric Group. The deal was financed by Chinese banks.

The low interest rate granted to Reliance by the Chinese lenders—five percent—has been widely watched by the financial community. The rate is well under China's current domestic long-term loan rate and Indian lenders' 12 percent benchmark rate.

China's business press carried the story above on Thursday.

Contact the writer of this story at: hes@china.org.cn.