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K.R. Srivats

New Delhi, Oct. 26 Even as the Government further liberalised the external commercial borrowing (ECB) policy to enable domestic companies get a better access to overseas funding in the current economic downturn in the developed markets, it is not considering any relaxation or removal of end-use restrictions under the policy, a senior Finance Ministry official said.

“We are not looking at it (end-use restrictions) right now,” Mr Ashok Chawla, Secretary, Department of Economic Affairs (DEA) in the Finance Ministry, said, when asked if the end-use restrictions would be relaxed in the context of the challenging economic environment.

Industry has been suggesting to the Government that end-use restrictions be removed to enable companies utilise ECB proceeds for working capital purposes.

Under the current ECB policy, utilisation of ECB proceeds is not permitted for working capital, general corporate purpose and repayment of existing rupee loans.

ECB proceeds cannot also be used in real estate.

Moreover, the proceeds cannot be utilised for on-lending or investment in the capital market or acquiring a company (or part thereof) in India by a corporate.

However, the policy allows ECB proceeds to be utilised for import of capital goods by new or existing production units. It can also used in the real sector — industrial sector including small and medium enterprises and infrastructure sector — in India.

The ECB proceeds can also be utilided for overseas direct investment in joint ventures/wholly owned subsidiaries.

Recently, as part of the liberalisation measures, the Government had allowed companies to avail themselves of ECBs of up to $500 million per borrower per financial year for rupee expenditure and/or foreign currency expenditure for permissible end-uses under the automatic route.

The Centre had also dispensed with the requirement of minimum average maturity period of seven years for ECBs of more than $100 million for rupee capital expenditure by the borrowers in the infrastructure sector.

The annual overall limit for ECB now stands at $35 billion.

More Stories on : Overseas Borrowings | Policy

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