In a bid to ease foreign currency borrowings, the Reserve Bank of India (RBI) on Thursday revised the average maturity for overseas borrowing by Indian companies.
"External Commercial Borrowing (ECB) up to USD 20 million or equivalent in a financial year is now with minimum average maturity of three years; and ECB above USD 20 million and up to USD 750 million or equivalent with minimum average maturity of five years," RBI said in a release.
This means, Indian companies can now raise money through foreign currency convertible bonds (FCCBs) upto USD 20-750 million without the regulator's approval (the automatic route) and can repay the debt in 3-5 years time. The time of repayment was not specified earlier.
Overseas borrowing assumed importance India Inc can Raising funds from overseas market is relatively cheaper than domestic market wherein
The latest RBI data shows that the overseas borrowings fell to a year's low to USD 1.33 billion as on November 2011; compared with USD 4.12 billion in July 2011.
However, corporates in sectors like hotel, hospital and software, can raise FCCBs up to USD 200 million for permissible end-uses during a financial year subject to the condition that the proceeds of the ECB should not be used for acquisition of land.
Earlier on June 30, the RBI had extended the buyback of FCCBs till March, 2012. Moreover, issuer companies were also permitted to raise fresh funds via ECB route to support their FCCB repayments. Prior to that, the central bank had expressed concern over the ability of FCCB issuers to meet their obligations, in its financial stability report.
Source: www.moneycontrol.com
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DENIP Consultants Pvt Ltd
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