The Hindu Business Line : Infrastructure funding: Banks too may tap ECBs

The Government and the Reserve Bank of India are working on a plan to permit a number of new entities such as commercial banks to raise ECBs for lending to infrastructure projects.

Senior Finance Ministry officials said that talks were in an advanced stage with the RBI for the purpose.

"We are discussing with the RBI to allow more entities such as commercial banks to raise ECBs for lending to the infrastructure sector. There is considerable progress in the talks," top Finance Ministry officials told Business Line.

The Government in June 2005 liberalised the ECB norms to permit a few financial sector entities engaged purely in infrastructure funding to raise ECBs. These include Infrastructure Development Finance Company, IL&FS and Power Finance Corporation. However, these entities are required to take prior approval of RBI's empowered committee for raising ECBs.

The Finance Ministry feels there is a strong case for permitting more entities to raise ECBs to boost fund flow into the infrastructure sector. Officials said such a move would be in line with the United Progressive Alliance Government's thrust on infrastructure development

"We do not see much logic in having only a small number of entities that can raise ECBs for financing the infrastructure sector. More players can be allowed to raise such funds within the overall annual country ceiling for ECBs," the officials said.

ECB and its norms: ECBs include commercial loans such as bank loans, buyers' credit, suppliers' credit and securitised instruments such as floating rate notes and fixed rate bonds that are secured from overseas lenders. The tenure of the borrowing has to be for a minimum of three years.

The current ECB guidelines permit eligible borrowers to raise ECBs through two separate routes — the automatic and the approval.

The autonomic route permits ECBs up to $500 million, beyond which specific approval from the RBI or the Government is required. Within the automatic route, however, it has been stipulated that ECBs up to $20 million or equivalent should have a minimum tenure of three years and any amount beyond $20 million and up to $500 million must have a minimum average maturity of five years.

The eligible borrowers include companies and NGOs engaged in micro-finance activities.

However, banks, financial institutions, trusts and individuals are not permitted to raise such funds.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
ITSA-Govt tiff may delay telecom projects

Infrastructure funding: Banks too may tap ECBs

Limited liability concept may be extended to manufacturing

Sentiment turns bearish

Online advertising `clicks'

Edible oil imports up 19%; slowdown in Sept

Vizag airport still under water; flights unlikely for a week