The new norms on external commercial borrowing are expected to push up borrowing cost by 50-75 basis points. But Indian companies are confident that expansion plans will not be affected much in view of the ample liquidity in the domestic banking system.
Y M Deosthalee, chief finance officer and a member of Larsen & Toubro's board, said companies accessed the domestic market for capital requirements, which might cost them a little more.
"The new norms will have a marginal impact," he said.
"The new ECB norms will only close down one window of finance for projects," said Seshagiri Rao, chief financial officer of JSW Steel. "Smaller companies will be more impacted by this move," he added.
Bharat Banka, head of corporate finance of Birla Global, said the move would bring down the 2 per cent interest rate arbitrage between local and international rates.
"This is good news for Indian companies buying assets abroad as there is no bar on them," he said.
The companies would now be forced to take loans from local banks that were funds-flush, he added.
The move would create more of a psychological impact on the movement of the rupee than stop companies from borrowing abroad, said Arun Chokani, finance director, Universal Cables.
It would lead to rupee depreciation, placing IT and pharmaceutical companies and other export-oriented companies in an advantageous situation, he felt.
Subramanian Sharma, director, Greenback Forex, said the changes had been expected at the same time as the Reserve Bank of India's July credit policy review.
He said the rupee might open slightly lower on Wednesday, given the increased pressure on rupee borrowing. "Inflows to that extent will get curbed," he added.
