Short-term ECBs may be allowed

 The review will also examine the interest rate band in which companies are allowed to raise loans abroad.

 The current all-in cost ceilings for interest rate spreads for such loans are up to 450 basis points over the six-month Libor (London inter-bank offered rate).

 Government sources connected with the exercise said the restriction on raising short-term loans and the floor on maturity were set in the 1990s and there was a need to change the yardsticks now.

 However, they ruled out any change in restrictions on end-use, which prohibit raising such loans for investment in stock markets and in real estate, except for investment in developing townships.

 They also said there was little possibility of raising the present cap for automatic approval from $50 million.

 Under the prevalent ECB policy, for units other than those in special economic zones, a loan must be for a minimum average maturity of three years. The maturity goes up to five years for loans larger than $20 million.

 The sources said the policy might relax this floor. The bar on short-term loans was necessary earlier, but with the rise in foreign exchange reserves and the sustained fall in the level of external debt, both the finance ministry and the Reserve Bank of India feel that the bar can be lowered.

 Similarly, the current all-in cost ceilings for interest rate spreads