New Delhi: The government and RBI on Wednesday further eased overseas borrowing norms for Indian companies by allowing those in the infrastructure and manufacturing space to refinance a higher level of their rupee loans using external loans.
While the government had earlier decided to allow these companies to borrow up to 50% of the forex earnings of the last three years, the cap has now been hiked to 75%. In addition, special purpose vehicles of these companies set up over a year ago will also be eligible to tap this route to raise resources at a lower cost.
The rule relaxation is in line with the finance ministry's thrust to prop up manufacturing activity and boost infrastructure construction.
To lower the cost of funds for the small scale sector too, Sidbi has been allowed to raise ECB (external commercial borrowings) that can be then lent to the segment that accounts for a large chunk of manufacturing as well as exports.
Similarly, National Housing Bank and housing finance companies have been allowed to use the ECB route to raise funds for low-cost housing projects.
While these steps were announced after a meeting of the high-level committee on ECBs, which met here, a move has also been initiated to get foreign institutional investors (FIIs) to invest up to $5 billion in rupee bonds, which will be within the overall corporate bond limit of $45 billion.
In a statement, the finance ministry further said refinancing of buyer's credit for import of capital goods in the infrastructure sector will be placed under automatic route. In addition, the high-level committee decided to increase the maturity period of buyer's credit to maximum of five years, giving companies more time to repay.
ECBs are considered attractive as cost of raising the loan is lower than that of domestic borrowings. Besides, they provide an additional avenue to access large amounts of funds from international financial markets.
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