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ETuropean Investment Bank (EIB), the world's largest multilateral borrower and lender, has sought Reserve Bank of India's approval to finance various infrastructure projects in the country in Indian rupee.
The financial arm of the 28-member European Union has already decided to expand its operations in India considering its growth prospects and business-friendly initiatives taken by the current dispensation.
"In India, we cannot fund in rupees. We hope to be able to extend financing in local currency after having discussions with RBI," Sunita Lukkhoo, Regional Manager of South Asia Operations at the EIB, said when asked about the issue.
She said preliminary talks on the issue have already started. Allowing the EIB to fund projects in local currency will cut cost of funding as there will be no hedging cost.
Allowing the EIB to fund in local currency will bring down the cost of financing and it will help the borrowers to a great extent, Lukkhoo said.
The EIB, the world's largest multilateral borrower and lender by volume, has been financing major infrastructure and social sector projects across the globe.
So far, the EIB has provided Euro 1.07 billion to various projects in India in the last few years and the hedging cost of loans have been borne by the borrowers.
The EIB has been funding projects through the State Bank of India (SBI). In January, it had signed an agreement with the SBI to extend a loan of 100 million euro (about Rs 700 crores) to private businesses in the country.
Identifying India as a major market for the EIB in the next few years, Lukkhoo hoped that the bank will be able to get the clearance under the new government that has undertaken various reform initiatives to attract FDI and boost growth.
Meanwhile, the Director of Global Partners at the EIB Patrick Walsh said the bank was interested in funding Indian companies to do business in agricultural sector in Africa.
He also identified Kenya and Tanzania for agri-business projects and said Indian groups can partner with European companies to exploit the opportunities in African countries.
Walsh said the EIB was trying to encourage European companies to find new markets and that India was one of the promising countries which has huge investment opportunities.
He said the EIB was interested in facilitating low-cost funding to various infrastructure projects as well as to small and medium enterprises (SMEs) in India.
The EIB, owned by all 28 EU member countries, borrows money on the capital markets and lends it at a low interest rate to projects that improve infrastructure, energy supply or environmental standards, both in the EU and in neighbouring or developing countries.
The EIB has already identified sectors such as private business as well as environmental sustainability and social infrastructure projects as focus areas to extend funding in India.
