After holding consultation with Indian companies, especially in the infrastructure sector, the government may relax guidelines for accessing funds through external commercial borrowing (ECB), media reports indicate.
Under the ECB route, borrowers can raise dollar-denominated loans directly from international banks, international capital markets, multilateral financial institutions such as International Finance Corporation and Asian Development Bank, export credit agencies, suppliers of equipment, foreign collaborators and foreign equity holders.
Before relaxing the norms, the government would try to know the funding requirements of domestic companies and verify this with the foreign lenders of these firms, reports indicate.
Union finance ministry reportedly feels that companies tend to inflate their funding requirement and they don’t borrow as much as they claim to be requiring.
Reports also indicate that the finance ministry wants to relax ECB norms to attract dollars and ease pressure on the depreciating rupee. Dollar inflow is required to meet the high current account deficit (CAD) in the country.
But experts opine that net dollars inflow might not be enough to finance the CAD in 2013-14.
Some analysts suggest the government to allow all sectors to access ECB window except the ones in negative list. The government must define the negative list, experts opine.
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