e company using the entire amount as it would come under ‘approval’ route. India currently allows ECBs in US dollar, euro, British pound and Japanese yen.
“The cost of borrowing in Renminbi is far less,” said a finance ministry official. “Companies go for it as it is on easier terms. We are getting their (China’s) money cheap.”
The limit for automatic approval has also been increased from $100 million to $200 million for the services sector (hospitals, tourism) and from $5 million to $10 million for non-government organisations and microfinance institutions. The decisions will come into effect through a notification by RBI.
The relaxation came in the wake of high interest rates in India and rising global uncertainty. Finance ministry officials said more than 90 per cent of the decisions were based on the industry’s suggestions at a meeting with finance minister Pranab Mukherjee last month.
Among other key decisions, the ministry allowed high networth individuals for investment in infra debt fund, included infrastructure finance companies as eligible issuers for FII’s debt limit for infrastructure, permitted refinance of buyer’s/suppliers credit through ECB, okayed interest during construction under ECB, gave a nod to availing of ECB denominated in rupee since the borrower is insulated from the exchange rate risk, and provided clarity on definition of equity for ECB from foreign equity holders.
On the issue of exempting withholding tax on interest payable on ECBs of maturity of five or more years, an official said it would be “taken up strongly” with the department of revenue.
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