Thread: Relaxation in ECB norms unlikely in near future: FinMin sources 5 Aug, 2008

NEW DELHI: Any further relaxation in the external commercial borrowings (ECB) norms is very unlike in the near future, finance ministry sources said.

"Further relaxation in curbs on external borrowing norms (ECB) is unlikely in near future," finance ministry sources said.

To arrest sharp appreciation of the rupee that was hitting margins on exports, the finance ministry in 2007 imposed curbs on ECBs. Only 20 million dollars of the money raised abroad was allowed to be remitted in India.

The restrictions on the ECB policy were relaxed to some extent in May, and 50 million dollars raised abroad were allowed for rupee expenditure. In case of infrastructure sector, 100 million dollars were allowed to be sent back to the country.

The finance ministry was mulling further relaxation in ECB norms to help companies raise money abroad at cheaper rates and to combat high double digit inflation through increase in capital inflow.

A high-level coordination committee on finance comprising senior officials from the finance ministry, RBI and SEBI recently held in Mumbai, but it did not take up the issue of easing curbs on ECBs.

Restrictions on ECBs, especially rupee expenditure, have impacted infrastructure funds as most of their expenditure is domestic. Tapping cheaper debt abroad for such expenses helped companies keep a check on project costs.