Change in norms nix a dozen ECB proposals

 Among the proposals that have been rejected include the ECB plan of $100 million each of the Power Finance Corporation and the National Housing Bank and a one year fund raising programme from the National Hydro Electric Power Corporation (NHPC).

 Since the release of the new policy on ECBs, banks were under a dilemma as to whether the existing proposals in the pipeline will be reviewed as per the new norms or under the old policy.

 This was because these proposals were put up much before the new policy was announced, the bankers said. They added that after the release of the new policy, proposals have virtually died down.

 The ECB norms were revised in the second week of this month whereby the ministry has put a end use restriction for loans above $50 million.

 It has been specified that foreign loans exceeding $50 million could be raised for financing import of equipment and meeting of foreign exchange requirements of infrastructure projects.

 Banks, financial institutions and non-banking finance companies have been barred from tapping ECBs and the interest rate spread have been lowered from 300-450 bp to 150-300 bp.

 However, the new norms are not applicable to borrowing proposals for restructuring of textile and steel sectors.

 Till now, the only restriction on the end use of ECBs was aimed at speculative investments and funding in real estate.

 Further, in order to reduce the need of sterilising the effect of forex inflows into the monetary system through increase in rupee liquidity, corporates have been asked to park unused loans abroad.