$14.3 b flows in through ECB window till Dec

NEW DELHI: India Inc raised over $14.3 billion from overseas debt markets till December 2006 this fiscal. The government had raised the annual limit of external commercial borrowings (ECB) for the fiscal from $18 billion to $22 billion. According to finance ministry officials, the original limit of $18 billion is expected to be breached by the end of the financial year.

According to ECB guidelines, all companies registered under the Companies Act — except financial institutions such as banks, financial intermediaries and housing finance companies — are eligible to raise up to $500 million under the automatic route in a financial year. For financial institutions dealing exclusively with infrastructure or export finance such as IDFC, IL&FS and Power Finance Corporation among others, it had been decided that approval would be given by RBI on a case-by-case basis.

Funds from overseas markets work out cheaper compared to domestic borrowings. Also, the availability of funds from international markets is huge compared to the domestic market. So, corporates can raise large amounts of funds at competitive prices depending on the risk perception. The growth in the domestic debt market has not been able to keep pace with the demand for debt.

“We expect the ECB limit for the year to beexhausted by the end of the fiscal. As on December 31, total ECBs stood at $14.3 billion,” a finance ministry official said.

ECBs are defined to include commercial bank loans, buyers’ credit, suppliers’ credit, securitised instruments such as floating-rate notes and fixed-rate bonds, credit from official export credit agencies and commercial borrowings from multilateral financial institutions. ECBs are approved within an overall annual ceiling. Minimum average maturities for ECBs as defined by the government are as follows:

ECB up to $20 million or equivalent should have a minimum average maturity of three years and ECBs above $20 million or equivalent must have an average maturity of five years.

Recently, however, the government enhanced the tenure of ECBs. Now, entities wanting to raise ECBs can raise it for a tenure of up to 10 years instead of the earlier three to five years.