Mumbai: The Reserve Bank on Wednesday eased norms for companies in the manufacturing sector in raising overseas funds and allowed Indian banks to market masala bonds in line with the government’s measures to prop up the rupee.
Following a review of the economy by Prime Minister Narendra Modi last week, the government announced an array of measures to check the decline of the rupee and curb the widening current account deficit (CAD).
Liberalisation of the external commercial borrowing (ECB) norms was among other measures announced by the government.
“It has been decided, in consultation with the government, to liberalise some aspects of the ECB policy, including the policy on rupee-denominated bonds (masala bonds)," the RBI said in a notification.
According to the revised policy, eligible borrowers which are in manufacturing, will be allowed to raise ECBs up to $50 million or its equivalent with a minimum average maturity period of 1 year. The earlier average minimum maturity period was three years.
The central bank has also made changes in norms wherein Indian banks can market masala bonds overseas. At present, Indian banks can act only as arrangers or underwriters for such bonds and in case of underwriting an issue, their holding cannot be more than 5 per cent of the issue size after six months of the issue.
Now, banks can “participate as arrangers/underwriters/market makers/traders in rupee-denominated bonds issued overseas, subject to applicable prudential norms," the notification said.
The rupee has been losing value against the dollar, and had almost touched 73 on Tuesday. However, the home currency bounced back by 61 paise on Wednesday to end at 72.37 against the dollar.