This may form part of the government's review of the ECB policy, even as the Reserve Bank of India and the finance ministry have been taking several measures to reduce money supply and thereby inflation.

External commercial borrowings form an integral part of foreign capital inflows and the Reserve Bank of India has to absorb the rupees used to buy dollars to curb rupee appreciation.

The other options under consideration include asking companies to raise ECBs only through banks and not any other intermediaries like private equity, or even export-import banks which offer subsidised loans.

The ECB policy may also make it mandatory for borrowers to bring in the money raised through this route only when it is ready for use.

The government currently prescribes the ceiling on interest rates for external commercial borrowings. At present, the cost of raising a five-year ECB is 350 basis points above the London interbank offered rate. For loans with a maturity of three to five years, the cost is 200 bps over Libor, which is the international benchmark for interest rates.

Banking sources said a further reduction in the ECB rates will help check inflows -- the primary objective of the review -- since few companies will be able to raise loans at such fine rates.

In addition, banks may be asked to certify the end-use of the borrowings. The Reserve Bank of India has so far been cautious in granting loan registration numbers for external commercial borrowings of up to $500 million, which are under the automatic approval route.

While there is little chance of a reduction in this limit, the central bank is now insisting on a certificate from chartered accountants on the end-use of the funds borrowed.

Moreover, Indian banks have been asked to direct their foreign branches not to forward loan documents for reporting to the Reserve Bank of India if the loan has not been originally syndicated by them. This stricture is valid even if a company maintains a credit line with the overseas branch of the bank. This is because the Indian lenders, in this case, will not be involved in monitoring the end-use of the funds.

However, sources close to the developments said the government is not inclined to bring down the overall ceiling on ECBs from the current levels of $22 billion since that would mean backtracking on a key reform measure.