Government eases overseas borrowing rules for companies

29 May 2008

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.