| Finance ministry puts curbs on ECB inflows |
| BS Reporter / Mumbai August 8, 2007 |
| The government today stepped in to check foreign currency inflows by putting up stiff restrictions on overseas borrowings, a measure sought by the Reserve Bank of India (RBI) to enable it to check the rupee's sharp appreciation against the dollar. External commercial borrowings (ECB) above $20 million have now been allowed only for foreign currency expenditure for permissible end-uses and are required to park them overseas. Overseas borrowings for meeting rupee expenditure will henceforth be only after obtaining prior RBI approval, and will need to keep the funds overseas till actually required for making payments. The curbs would further curtail foreign currency inflows, already expected to be impacted by the turmoil in the global credit market following heavy losses suffered by lenders and investors in the US subprime mortgage market. The finance ministry statement said the revised ECB guidelines would not apply to borrowers who already have loans agreements and obtained loan registration numbers from RBI. The annual per company ECB cap of $500 million has been kept unchanged. The move comes a week after RBI said in its first quarter policy review that its inflation target of 5% hinged on the government undertaking a |
