Home Finance Cos Allowed to Tap ECBs for Low-Cost Units

The government on Wednesday further eased overseas borrowing rules for corporates and investment rules for foreign institutional investors (FIIs). FIIs can now buy up to $5 billion in corporate bonds. This has been carved out from the current overall $45-billion limit prescribed for corporate bonds, a finance ministry official said.

The finance ministry has also allowed mortgage companies to access external commercial borrowings (ECBs) to fund affordable housing. “It has been decided that entities like NHB, housing finance companies will be included as eligible borrowers for financing such low-cost housing projects,” a finance ministry official said.

In another decision, refinancing of buyers' credit for import of capital goods in infrastructure sector will be put on the automatic route subject to certain conditions. The maturity for such credit has been increased to five years. The official said SIDBI will be allowed to tap the ECB market for funding the MSME sector subject to some conditions to be finalised by RBI shortly.

The government also hiked the maximum limit of funding rupee loans via ECBs to 75% of forex earnings recorded in the previous three years or 50% of the highest forex earnings recorded in one of the previous three years. Special purpose vehicles will also allowed to avail this facility.

Also, eligible non-resident entities will now be allowed to credit enhance the issue of rupee bonds by all companies.

The minimum maturity for these bonds has been reduced from seven years to three.

In June, the Reserve Bank of India increased FII limit in government bonds to $20 billion from $15 billion, while allowing up to $10 billion from overseas borrowings by India Inc for refinancing rupee loans.

The government also eased rules for luring more FII inflows in infrastructure development funds and allowed qualified foreign investors to invest in mutual fund schemes that hold at least 25% of their assets in infrastructure sector.

Financial Express, New Delhi, 23-08-2012