To improve liquidity and check depreciation of rupee, finance ministry today relaxed norms to allow companies in the mining, exploration and refineries sectors to bring in up to $500 million in external commercial borrowing (ECB) to the country for rupee expenditure. The earlier limit was $50 million.
This is the second time in a fortnight that the ministry has tweaked norms to address liquidity crunch faced by companies amid a global financial market meltdown. The move will also result in more inflow of foreign currencies in to the country and will help check deprecation of rupee, which is at a five year low at around 48 against the US dollar.
“On a review, it has been decided that for development of the mining, exploration and refinery sector in the country, the definition of infrastructure for the purpose of ECB may be expanded,” the ministry said in a statement.
Therefore the infrastructure sector will be defined in the ECB policy as (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport (vi) industrial parks (vii) urban infrastructure (water supply, sanitation and sewage projects), and (viii) mining, exploration and refining.
All other aspects of ECB policy such as eligible borrower, recognized lender, end-use of foreign currency expenditure for import of capital goods and overseas investments, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.
The above amendments in ECB policy will come into force on the date of Notification of Regulations issued by the Reserve Bank of India, in this regard under the Foreign Exchange Management Act, 1999.
On September 22, the ministry had announced a five-fold increase in the amount of money that companies building roads, ports and other infrastructure projects can bring from overseas for expenditure in India.
It had also raised the upper limit of interest paid for such overseas borrowings by 100 basis points for tenors above seven years to enable companies borrow at competitive rates from international markets, where interest rates have also hardened.
