A high level committee on External Commercial BorroÂwings (ECB) relaxed several norms on overseas borrowings by Indian financial institutions and companies. The panel liberalised overseas borrowing norms to allow easier access to cheap dollar funds to housing finance companies such as HDFC, small industry financier SIDBI. Also, the committee has allowed foreign entities to provide credit enhancement to rupee bonds of Indian comÂpanies.
Even a company with low credit rating will be able to raise foreign funds using credit enhancement facility – a third party assures the lender that he will be compensated if the borÂrower defaulted. These faciÂlities come at a cost, but allow lower rated companies to raise funds. The minimum maturity period of such bonds has been reduced from seven years to three years. Foreign institutional investors have been permitted to invest in these bonds up to $5 billion within the overall corporate bond limit of $45 billion.
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