Remove limits on overseas borrowings by corporates, recommends Sahoo committee: Report

NEW DELHI: A high-level government committee has pitched for a major liberalisation of the overseas debt framework for Indian companies. The panel headed by former Sebi member M S Sahoo has said restrictions on borrowers, lenders, end-uses, amount, maturity, all-in-cost ceiling must be removed as these were product of the time and had outlived their utility.

"These must be removed as these do not address now the identified market failure associated with external commercial borrowings that is, systemic risk arising from currency exposure and global risk tolerance", the report made public on Friday said.

The ECBs may be allowed to be accessed by any firm for any end use, it said.

The negative list under the FDI policy should be the negative list for ECBs as well, it added.

The report said ECBs may be obtained from any lender who is from a FATF compliant jurisdiction and who has no Indian interests.

This implies that domestic Indian banks, along with their overseas branches and subsidiaries of banks incorporated in India, should not be allowed to extend ECB, including guarantee, it said.

It also said there should be no restriction on the amount that a firm can borrow and it should be linked to its commitment to hedge the currency exposure emanating from ECB

"Irrespective of the nature and purpose of ECB, every borrower must hedge a specified percentage of its currency exposure. Such percentage must be uniform across sectors or borrowers," it said.