Govt may relax ECB norms soon

Govt may relax ECB norms soon


Mumbai: Indian corporates facing liquidity crunch due to global financial turmoil and advance tax payments may get relief with the easing of external commercial borrowings (ECB) norms, expected shortly.

Banking industry sources said the government and the Reserve Bank are actively considering ECB relaxation within a fortnight.

“The government and the RBI are holding discussions on further relaxation of ECB norms. A decision in this regard is expected very soon. This would certainly contribute to ease the prevailing tight liquidity conditions," a top official with a public sector bank told PTI.

Further liberalisation in ECB norms is expected to help corporates access cheap funds abroad for financing their projects in productive sectors, primarily in infrastructure.

“The policy makers are widely expected to raise the cap for rupee expenditure in the infrastructure sector through the ECB route," the official said.

At present, ECB borrowings up to $100-million (nearly Rs400 crore) could be sent back to the domestic market for spending in the infrastructure sector. In other sectors, this cap is $50 million.

The government had relaxed ECB norms in May this year. Prior to that, Indian companies opting for ECB route to raise funds were allowed to bring up to $20 million to the domestic market, after getting the RBI permission.