Govt to raise ECB cap from $22 bn to $18 bn

The government will now allow companies to raise more foreign loans. It has asked the Reserve Bank of India to raise the external commercial borrowing (ECB) ceiling for 2006-07 to $22 bn, instead of $18 bn at present.

The move is expected to help companies like Reliance Communications, whose applications to raise $4 bn is awaiting approval. The Reliance Communications board had cleared a proposal to let the company raise long-term resources including ECBs. The board had also approved raising $1 bn through foreign currency convertible bonds. Reliance Communications had filed three applications for raising $4 bn, with two of them seeking permission for loans worth $500 mn each and the third for $3 bn. Apart from Reliance Communications, India Infrastructure Finance Company Limited, the special purpose vehicle set up by the Centre last year, is also expected to raise a sizable amount to finance core sectors developed by PSUs and through the public-private partnership model. Another infrastructure finance company, IDFC, has already started the process to raise ECBs to finance projects.

With interest rates in India on the rise, more domestic companies are expected to opt for ECBs to lower interest costs. Till December, Indian companies raised $14.3 bn through ECBs, and with proposals for another $6-7 bn awaiting clearance by a high-level committee, the government had little choice but to raise the cap on ECBs.

Read the article in The Times of India.