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Govt relaxes foreign borrowing norms for companies

The government has allowed domestic firms to borrow up to $50 million from global sources without government approval and also permitted pre-payment of foreign loans ahead of schedule, a government statement said on Monday.

The move is aimed at liberalising foreign borrowing rules for Indian firms which until now had to seek government approval to borrow from international sources because of tight controls over the country's forex reserves.

Analysts said the decision to liberalise borrowing norms was prompted by the country's record forex reserves of over $60 billion.

"Applicants will be free to raise ECBs (external commercial borrowings) from any internationally recognised source such as banks, export credit agencies, suppliers of equipment, foreign collaborators, foreign equity holders, international capital markets," the statement said.

Under the liberalised norms, Indian companies will also be allowed to prepay foreign loans up to March 31, 2003 without any limit. Currently, companies can prepay 10 per cent during the tenure of a foreign loan.

The statement also said foreign borrowings could now be used for investment in the real estate sector, which had been barred until now.

The government also allowed export units in special economic zones to raise foreign funds up to $500 million a year without any maturity restrictions but such funds cannot be used by any subsidiaries of the export firms.

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