The objective of this paper is to study the share of debt financed by banks and financial institutions in respect of 601 sample firms during the period 1992–2003 and compares the practices of the public sector, private sector business group and foreign controlled firms in India in their dependence on these sources. It also examines the impact of the liberalized environment, in terms of the significant changes, if any, in phase-2 (years 1998–2003) of the liberalized business scenario vis-à-vis phase-1 (years 1992–1997). The paper also makes a modest attempt to ascertain the significance of differences among the sample firms due to differences in size and age class of the sample firms in the share of debt financed by banks and financial institutions. The study indicates that the share of debt financing by banks and financial institutions has significantly changed during the period covered by the study. The empirical analysis depicts a marked enhancement in the proportion of debt funded through banks. In contrast to banks, the role of financial institutions points in the opposite direction; its share in total-borrowings has declined sharply. Ownership control was a significant factor throughout the period of study. Contrary to the general perception, public sector firms made the least use of financing through financial institutions; the private sector business group firms made the maximum use. The survey findings also indicate that foreign controlled firms relied more on banks vis-à-vis their domestic counterparts in financing the borrowings.
