India relaxes norms for foreign borrowings up to $50mn
Tuesday, 17 September 2002, 19:30 IST
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NEW DELHI: Companies wanting to raise up to $50 million from internationally recognized sources in a year will no longer need government approval, an official statement said here Monday. They would now also be able to prepay their debts without restrictions. Under existing norms, Indian companies can repay only 10 percent loan annually during the tenure of the borrowing. This prepayment relaxation would be effective up to March 31, 2003, the notification said. India's apex Reserve Bank would oversee the prepayment. This provision would, however, be subject to review keeping in view the market conditions, it added. Approved sources for external commercial borrowings (ECB) include banks, export credit agencies, equipment suppliers, foreign collaborators, foreign equity holders and international capital markets. "Offers from unrecognized sources will not be entertained and this would also be applicable for ECBs below $5 million," the statement said. Another important facet of the new foreign borrowing norms is the relaxation on use of funds in real estate. The end-use restrictions on ECB proceeds for real estate have been lifted. "Henceforth, ECB could be raised for the development of integrated townships," the note said. Non-profit organizations and trusts would, however, continue to be barred from raising ECBs. "A borrower can raise up to a maximum of $50 million under auto-route during a given financial year. "In case a borrower decides to raise more than one ECB in a given financial year for ECBs up to $20 million, the minimum average maturity would be three years. "For amounts in excess of $20 million, the average maturity would need to be five years." The government has also removed restrictions on companies operating in special economic zones (SEZ) to raise funds overseas. "Units in SEZs may be allowed to raise ECB without any maturity restriction but through recognized banking channels and strictly on a 'standalone basis'." Standalone units in this case would mean a subsidiary or a branch of a company registered outside India, or a company that is registered independently for operating in one or more zones in the country. There would be an annual cap of $500 million for such units in SEZs to avail this facility.
Source: IANS
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