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Our Bureau

Mumbai, Oct. 22 In yet another move to improve availability of funds, the Reserve Bank of India on Wednesday relaxed the external commercial borrowing norms with immediate effect.

Indian corporations can now borrow up to $500 million overseas for rupee or foreign currency expenditure. RBI has also lifted the minimum average seven-year maturity for ECBs of more than $100 million for rupee capital expenditure in the infrastructure sector.

For the telecom sector, ECBs can be used for acquiring licences or permit for 3G Spectrum. ECB borrowers are also allowed to remit the funds to India and park their funds in their rupee accounts in the country until use. However, the rupee funds will not be permitted for investment in capital markets, real estate or for inter-corporate lending.

At present, ECB proceeds are required to be parked overseas until actual requirement in India and such proceeds can be invested in the following liquid assets: (a) deposits or certificate of deposit offered by banks rated not less than AA (-) by Standard and Poor/Fitch IBCA or Aa3 by Moody’s; (b) deposits with overseas branch of an authorised dealer of bank in India; and (c) Treasury bills and other monetary instruments of one-year maturity having minimum rating as indicated above.

RBI has also relaxed the norms for costs on ECB borrowing. The all-in-cost of borrowing for 3-5 years has been increased from 200 to 300 basis points above six-month Libor; for 5-7 years from 350 bps to 500 bps; and for more than seven years from 450 bps to 500 bps.

Analysts said the relaxations to the ECB norms announced Wednesday would make little difference to companies in India as overseas lenders themselves are cash strapped.

More Stories on : Overseas Borrowings | Policy

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