The government has relaxed overseas borrowing rules for companies, raising the permissible limit to $50 million from $20 million in a move expected to bolster the rupee.

At present, borrowers proposing to avail ECB up to Rs 42 crore expenditure for permissible end-uses require prior approval of the Reserve Bank under the approval route.

Borrowers in infrastructure sector may now be allowed to avail ECB up to $100 million for rupee expenditure for permissible end-uses under the approval route.

In case of of other borrowers, the existing limit of $20 million for rupee expenditure for permissible end-uses under the approval route has been enhanced to $50 million.

The government tightened the rules last August, restricting overseas borrowing limit for domestic firms in a bid to reduce high capital inflows which were pushing up the currency and complicating monetary policy management.

The limit for foreign institutional investment (FII) in government and corporate bonds has been raised to $5 billion and $3 billion respectively from $3.2 billion and $1.5 billion.

The cost of external commercial borrowings would be raised to 200 basis points over 6-month LIBOR for debt of three to five years' maturity, from 150 bps.

For debt of more than five years' maturity, the cost would be 350 bps over 6-month LIBOR, up from 250 bps previously.

The changes would take effect once the Reserve Bank of India issues a notification, the finance ministry said in a press release.

The changes will apply to overseas borrowings under both the automatic and approval routes but the $500 million limit per company per year for automatic approval remained.

The government reviews the external commercial borrowing (ECB) policy regularly in consultation with the Reserve Bank of India to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and lessons of experience, the release added.