At a time when funding has become increasingly difficult for corporates across the globe for expanding capacity and growing businesses, since global economic slowdown made the lenders apprehensive of funding projects. The government is expected to relax norms, as early as next week, to make it easier for domestic companies to raise money through External Commercial Borrowings (ECBs), in a bid to boost a slowing economy,
Among measures recommended by the committee of secretaries include, permitting realty firms to tap ECBs, relaxing borrowing norms for non-banking finance companies (NBFCs), increasing the ECB limit 50 per cent to $750 mn under the automatic route (without RBI’s approval and raising the price ceiling at which overseas loans can be raised.
At present, real estate firms are not allowed to tap the ECB route and NBFCs are allowed to borrow within guidelines specified by the Reserve Bank of India (RBI). For the real estate sector, norms could be relaxed only for integrated township projects, realty firms were demanding infrastructure status for real estate apart from using ECB proceeds without restriction.
Earlier in the year in October, the government had permitted companies to use the ECB route up to $500 mn per financial year for rupee expenditure under the automatic route (see table). In addition, the India Infrastructure Finance Company Ltd (IIFCL) was allowed to raise Rs 10,000 cr of tax-free bonds and function as a refinancer for the sector.
Project awards by authorities such as the National Highways Authority of India have come to a virtual standstill because of, among other things, concerns over the viability of projects and high interest rates. Meanwhile, the government has decided to revise upwards cost estimates of 60 highway projects worth Rs 70,000 cr by up to 20%, to help road developers borrow more funds and boost road building activity across the country
The government is also expected to relax the pricing allowed for borrowing foreign exchange loans by raising the spread or premium charged over the international interest rate benchmark, the London Interbank offered rate (Libor). At present, a company cannot pay more than 300 bps over Libor on loans for three to five years and not more than 500 bps over Libor for loans above five years.
Among measures recommended by the committee of secretaries include, permitting realty firms to tap ECBs, relaxing borrowing norms for non-banking finance companies (NBFCs), increasing the ECB limit 50 per cent to $750 mn under the automatic route (without RBI’s approval and raising the price ceiling at which overseas loans can be raised.
At present, real estate firms are not allowed to tap the ECB route and NBFCs are allowed to borrow within guidelines specified by the Reserve Bank of India (RBI). For the real estate sector, norms could be relaxed only for integrated township projects, realty firms were demanding infrastructure status for real estate apart from using ECB proceeds without restriction.
Earlier in the year in October, the government had permitted companies to use the ECB route up to $500 mn per financial year for rupee expenditure under the automatic route (see table). In addition, the India Infrastructure Finance Company Ltd (IIFCL) was allowed to raise Rs 10,000 cr of tax-free bonds and function as a refinancer for the sector.
Project awards by authorities such as the National Highways Authority of India have come to a virtual standstill because of, among other things, concerns over the viability of projects and high interest rates. Meanwhile, the government has decided to revise upwards cost estimates of 60 highway projects worth Rs 70,000 cr by up to 20%, to help road developers borrow more funds and boost road building activity across the country
The government is also expected to relax the pricing allowed for borrowing foreign exchange loans by raising the spread or premium charged over the international interest rate benchmark, the London Interbank offered rate (Libor). At present, a company cannot pay more than 300 bps over Libor on loans for three to five years and not more than 500 bps over Libor for loans above five years.
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