Financial Daily from THE HINDU group of publications
Saturday, Jun 04, 2005
Financial Daily from THE HINDU group of publications Saturday, Jun 04, 2005 |
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Money & Banking
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NBFCs Government - Financial Policy NBFCs allowed to borrow overseas Our Bureau
New Delhi , June 3 THE United Progressive Alliance Government revised the external commercial borrowings (ECBs) norms for the first time after assuming office more than a year ago. The ECB norms were last revised in January 2004, according to an official release. The Government today permitted non-banking finance companies (NBFCs) to go in for ECBs to meet their fund requirements through the approval route from lenders such as multilateral financial institutions, reputed regional financial institutions, official export agencies and international banks towards import of infrastructure equipment for leasing to infrastructure projects with a minimum average maturity of 5 years. Housing finance companies with strong financials satisfying criteria specified by the Reserve Bank of India too would be permitted to issue foreign currency convertible bonds (FCCBs) through the approval route. An empowered committee of the RBI would decide on cases that come under the approval route. Today's revision also permits financial institutions dealing exclusively with infrastructure or export finance such as IDFC, IL&FS, Power Finance Corporation, Power Trading Corporation, IRCON and Export-Import Bank of India to go in for external commercial borrowings. However, they have to obtain approval from the RBI's empowered committee on a case-to-case basis. Banks and financial institutions that had participated in the textile or steel sector restructuring package as approved by the Government too have been permitted to raise the ECBs to the extent of their investments in the package and assessment by the RBI based on prudential norms. Any ECB availed for this purpose so far is deducted from their entitlement. The Government also raised the repayment limit of external commercial borrowings to $200 million from $100 million. All ECBs would be subject to a specific maximum spreads over the previous six month LIBOR rates for the respective currency. The interest spread ceiling would include rate of interest, other fees and expenses in foreign currency except commitment fee, pre-payment fee and fees payable in Indian rupees. Moreover, the payment of withholding tax in Indian rupees is excluded for calculating the all-in-cost. The revision also partially relaxes the strict practice of not issuing guarantee, standby letter of credit, letter of undertaking or letter of comfort by banks, financial institutions and NBFCs relating to the ECB. Applications for providing guarantee/standby letter of credit or letter of comfort by banks, financial institutions relating to ECBs will now be considered on merit basis subject to prudential norms, the release said.
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