Medium-sized corporates are emerging as the preferred customers of banks for dollar-denominated loans.

An acute paucity of dollars is forcing the banks to sidestep high-ticket deals from large companies.

The rising demand for dollars is pushing up the rates on loans that domestic banks take from their foreign counterparts.

Even the foreign banks are finding it difficult to lend as they are exhausting the country limit from their parents.

Rates on interbank dollar loans, which are being borrowed at various tenors such as overnight, one-month and six-month, are being pegged to the London Interbank Offered Rate.

Bankers said the rates have steepened mostly for the six-month loans.

Earlier, big corporates flocked to the external commercial borrowings market with big deals despite the banks charging high margins. They are waning now.

"Syndicated ECB deals are drying up as big demands are difficult to meet," a banker said.

Ergo, banks are going for bilateral negotiated deals with mid-sized firms. Small demands are being given the priority keeping in view of the availability of greenbacks.

Moreover, big borrowers are preferring rupee loans to dollar ones due to the ample liquidity in the domestic market.

With rates on dollar loans at life-time lows, most of the firms which availed of ECBs earlier are refinancing their high-cost debt at lower rates.

They are also buying back their high-cost rupee debt as part of interest-rate restructuring.