The government has decided to allow companies to borrow abroad on merit to settle their bad debts.
A high-level committee on external commercial borrowing has, however, endorsed the government's stand on encouraging companies to access the domestic debt market first.
Although the finance ministry has not received any proposal for swapping non-performing assets with external commercial borrowing, any proposal to raise over $100 million will be considered favourably.
This will not need any change in the external borrowing policy because there is no bar on raising loans abroad to fund such activities. Under the present rules, companies have to approach the finance ministry only if the loan is above $100 million.
Besides this, the committee has made no changes in the policy guidelines on foreign borrowing, including those on refinancing of existing loans under the automatic route and on their prepayment.
In the past few years, foreign loans have lost their lustre with the fall in domestic interest rates.
Besides, with the healthy growth in foreign exchange reserves the Centre has progressively relaxed end-use and prepayment norms for foreign loans.
The guiding principles of keeping maturities long, costs low and a focus on the infrastructure and export sectors have, however, remained.
In the Budget for 2003-04 Finance Minister Jaswant Singh took this a step further by removing the ceiling of $100 million on prepayment of foreign loans under the automatic route.
