The government today hiked the external commercial borrowing limits for Indian companies to $50 million for rupee expenditure for permissible end-uses under the approval route. The earlier limit was $20 million, which had been imposed last August.
In addition, infrastructure sector companies will now be able to avail ECB's of up to $ 100 million for rupee expenditure for permissible end-uses under the approval route. The move is aimed at providing a boost to the infrastructure sector, which requires $500 billion worth of investment during the 11th Five-Year Plan (2007-12), of which $ 30 billion is expected to come through this route.
The government has also increased the all-in-cost ceilings over six months LIBOR in respect of ECB for average maturity period between three years and five years to 200 bps, from 150 bps at present. For borrowings more than five years, the cost has been increased to 350 bps from 250 bps at present.
However, the existing $500 million annual borrowing limit for individual companies through the automatic route has been left unchanged. Other aspects of the ECB policy such as the end-use of foreign currency expenditure for import of capital goods and overseas investments, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements have also been left unchanged.
The decisions were taken at a high level committee on ECB's chaired by finance secretary D Subbarao here today. Officials from the Reserve Bank of India attended the meeting.
The high-level committee on ECB had agreed ‘in principle' last September to relax overseas borrowing norms for the infrastructure sector. However, huge capital inflows since then, which led to a sharp appreciation of the rupee, prevented the RBI from granting this leeway.
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