ECB, FDI norms may be eased

The government and the Reserve Bank of India are looking at easing external commercial borrowings guidelines and foreign direct investment norms to enhance overseas fund flows.

On ECBs, norms for which were eased earlier this year, a meeting on October 20 discussed the option of putting loans upto $ 500 million for rupee expenditure by Indian infrastructure companies under the automatic approval route. At present, such loans need RBI approval.

As a result, sources said, the government may raise the limit for dollar borrowings for rupee expenditure, which would need RBI approval. So, if a company is borrowing say $ 750 million, it can immediately access foreign funds up to $500 million without prior permission, but will need approval for the remaining amount.

Also, the spreads for pricing ECBs with a maturity of five years and above may be widened further to accommodate the rising cost of dollar debt overseas. ECBs are priced as a spread, known as an 'all-in cost ceiling,' over the London Interbank offered Rate, the global benchmark.

A proposal was also discussed to allow on-lending finance companies, especially to the infrastructure sector, to borrow overseas. This, however, will require modifying end-use norms, which currently prohibit on-lending. Many firms have reportedly sought such a relaxation.

Meanwhile, the department of industrial policy and promotion has also started a comprehensive review of FDI norms for sectors that have a ceiling or those that require Foreign Investment Promotion Board approval.

Sources close to the development indicated that the sectors under review are air transport services, asset reconstruction companies, broadcasting, companies investing in infrastructure and services sectors, insurance and the print media.