IDBI seeks RBI nod for $300 mn ECB

Industrial Development Bank of India (IDBI) has sought the Reserve Bank of India's (RBI) permission to raise $250-$300 million overseas for its lending requirements.

IDBI, which got converted into a bank in October 2004, cannot raise resources overseas as its legacy borrowings are in excess of the ceiling on external commercial borrowings (ECBs) by banks.

IDBI had earlier petitioned RBI to agree to put aside its foreign currency borrowings till March 31, 2005 and not consider these borrowings under the ECB policy.

IDBI wants overseas borrowings from April 1, 2005 onwards to be considered for adherence to the ECB policy. The central bank is still to take a view on IDBI's application, a IDBI source said.

The bank's foreign currency borrowings are in excess of 60 per cent of its Tier I capital of about Rs 8,516 crore.

The ECB policy restricts a bank's overseas borrowings to 25 per cent of its Tier I capital, which comprise paid-up equity, reserves and Tier-I bonds.

Most of IDBI's foreign currency borrowings are on account of special packages for textile, cement and steel sectors. This includes $300 million raised through an Euro bond in March 2004 to take care of needs of companies in the steel sector.

IDBI's argument is most of the its foreign currency resources are borrowings meant for specific purposes. These borrowings appear as pass-through on IDBI's books as the foreign currency risk is passed on to borrowers.

The outstanding foreign currency loans extended by IDBI to Indian corporates aggregated Rs 4,413.10 crore as on September 30, 2004, down from Rs 5,676.90 crore as on March 31, 2003.

IDBI's total outstanding borrowings "" both in rupee and foreign currency "" were nearly Rs 60,000 crore at the end of March 31, 2005.