Government and RBI to ease norms of ECB and FDI

Author: Anurag Bhullar

To increase the overseas flow of funds, Government and RBI are planning to smooth out the set of guidelines governing ECBs (External Commercial Borrowing) and FDI (Foreign Direct Investment). For ECBs, norms were eased earlier this year too. A meeting held on Monday discussed the pros and cons of putting a loan of amount $500 million to be used by infrastructure companies for rupee expenditure. This will be in the automatic approval route, thereby eliminating the need to obtain RBI’s nod, as has been the case so far.

The dollar borrowings limit for rupee expenditure, which needs RBI’s agreement, may be increased. For instance, if a company borrows $750 million, then foreign funds of up to $500 million can be had without permission but for the rest of the amount, approval is required.
	A review of sectors that have FDI limits imposed on them or the ones that require FIPB’s (Foreign Investment Production Board) approval has been started by Dipp (Department of Industrial Policy and Promotion). Prospects of allowing on-lending Finance companies to borrow overseas are also there in the pipeline. This is possible with some modification in the norms of end-use as these prevent on-lending in the current situation. Several companies have already asked for such relief.