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India plans to liberalize foreign borrowing norms for companies

India plans to liberalize foreign borrowing norms for companies

New Delhi: India plans to give the infrastructure sector a boost by liberalizing norms for companies to borrow abroad, a Planning Commission official said on Friday.

Gajendra Haldea, principal advisor to deputy chairman of the apex plan body, Montek Singh Ahluwalia, said the guidelines—details of which he declined to discuss—are currently being reviewed by the finance ministry and a decision is likely by the end of this month.

He was speaking on the sidelines of an industry meet on infrastructure.

The announcement comes in the backdrop of a heightened risk perception among lenders to infrastructure projects following the global financial crisis. Project awards by authorities such as the National Highways Authority of India have come to a virtual standstill because of, among other things, concerns over the viability of projects and high interest rates.

The finance ministry had in October relaxed foreign borrowing norms by increasing the limit of such borrowings and the ceiling on interest rates at which the money could be borrowed.

Meanwhile, India Infrastructure Finance Corp. Ltd chairman S.S. Kohli said his organization is working on a plan to provide subordinated debt. “It will take a while to announce the details," he said.

Subordinate debt refers to lending that is often more flexible in terms than regular debt. Repayment for such debt can often start later, sometimes even after the senior debt is paid off, often making projects more palatable for infrastructure lenders.

While Mint couldn’t immediately ascertain the nature and extent of the proposed relaxation, Haldea’s announcement came in response to a comment at the meeting from SREI Infrastructure Finance Ltd chairman and managing director Hemant Kanoria about the need to relax external commercial borrowing, or ECB, norms for non-banking finance companies, or NBFCs.

NBFCs are not allowed to borrow abroad and on-lend in India. Kanoria said SREI had sanctions of $450 million (about Rs2,120 crore) from bilateral institutions, which he could deploy immediately if the finance ministry relaxes norms. It is among the few private sector NBFCs that finance infrastructure equipment purchases.

“The ECB policy, as far as infrastructure is concerned, was already pretty good. They may tinker with the long-term nature of it, but I don’t know if it will make a big difference," said Amrit Pandurangi, who heads the infrastructure and transport practice for consultant PricewaterhouseCoopers.

Feedback Ventures Pvt. Ltd chairman Vinayak Chatterjee said at the meeting that private companies involved in infrastructure had to deal with 18 ministries, the Planning Commission as well as the Prime Minister’s Office and the need of the hour was to set up a national agency to monitor and facilitate infrastructure projects.

Sangeeta Singh contributed to this story.


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