Capital inflows trimmed to stem rise in Re
In a bid to regulate the dollar inflow & moderate appreciation in rupee, the govt has revamped norms governing external commercial borrowings made by corporates.
By INDIATIMES NEWS NETWORK |
NEW DELHI: In a bid to regulate the dollar inflow and moderate appreciation in rupee, the Union Government has revamped norms governing the external commercial borrowings (ECBs) made by corporates.
While retaining the ECB limits, the Finance Ministry has put in place revised end-use norms that make it mandatory for companies to use funds above $20 million to incur foreign currency expenditure and not meant for repatriation into India.
All foreign borrowings made over and above $20 million in a financial year would be parked outside India. These norms would be applicable to companies utilizing both the approved and automatic routes.
In a news release, the Finance Ministry said that the fresh norms would be in tune with the “evolving macro-economic situation, changing market conditions, sectoral requirements and external sector” apart from experience.
In consultation with the RBI, the Finance Ministry has revised the norms “to modulate the capital inflows through ECBs”.
The revised norms would impact both capital markets and the appreciation in rupee. While further hardening of rupee would be blunted, modulated capital inflows would also curb the volatility in the capital markets.
Following are the new norms set for ECBs by Corporates:
While retaining the ECB limits, the Finance Ministry has put in place revised end-use norms that make it mandatory for companies to use funds above $20 million to incur foreign currency expenditure and not meant for repatriation into India.
All foreign borrowings made over and above $20 million in a financial year would be parked outside India. These norms would be applicable to companies utilizing both the approved and automatic routes.
In a news release, the Finance Ministry said that the fresh norms would be in tune with the “evolving macro-economic situation, changing market conditions, sectoral requirements and external sector” apart from experience.
In consultation with the RBI, the Finance Ministry has revised the norms “to modulate the capital inflows through ECBs”.
The revised norms would impact both capital markets and the appreciation in rupee. While further hardening of rupee would be blunted, modulated capital inflows would also curb the volatility in the capital markets.
ADVERTISEMENT
Following are the new norms set for ECBs by Corporates:
(i) ECB more than $20 million would be permitted only for foreign currency expenditure as per end-use already specified. Borrowers raising ECB more than $20 million shall park the ECB proceeds overseas for use as foreign currency expenditure. The modified norm will be applicable to ECBs exceeding $20 million per financial year under the Automatic Route and under the Approval Route.
(ii) ECB up to $20 million would be permitted for foreign currency expenditure for permissible end-use under the Automatic Route and these funds shall be parked overseas and not remitted into India. Borrowers proposing to avail ECB up to $20 million for rupee expenditure for permissible end-use would require prior approval of the Reserve Bank under the Approval Route. However, such funds shall continued to be parked overseas until actual requirement in India.
(iii) All other aspects of ECB policy such as $500 million limit per company per year under the Automatic Route, eligible borrower, recognised lender, average maturity period, all-in-cost-ceiling, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.
(iv) These conditions will not apply to borrowers who have already entered into loan agreement and obtained loan registration numbers from the Reserve Bank. Borrowers who have taken verifiable and effective steps wherein the loan agreement has been entered into to avail of ECB in the previous dispensation, and not obtained the loan registration number, may apply to the Reserve Bank through their Authorised Dealer.
(v) The above amendment in ECB policy will come into force with immediate effect.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
