Industry body Assocham on Tuesday asked the Reserve Bank of India (RBI) to allow further relaxations in the external commercial borrowings (ECB) regime for Indian companies.
Among other measures suggested to the apex bank are delinking of ECB limits from the net worth of a company wherein the present cap of 50 per cent is lifted, Assocham Senior Advisor Jyotiromy Jain told reporters after a meeting with RBI Governor D Subbarao here.
The meeting assumes importance as over 50 companies have $5 billion ECB redemption due before December. Rating agency S&P, in a recent report, said nearly half of these companies would go for an extension, which would involve an additional $700 million interest outgo.
Additionally, the lobby group has sought a relaxation in present rules wherein borrowers have to hedge their entire chunk of ECBs, Jain said, stressing on the need to bring down the hedged component to 50 per cent. Jain, who was part of an Assocham delegation, led by Rajkumar Dhoot and D S Rawat, which met the RBI governor, said companies having foreign earnings should be given a leeway as they have foreign earnings in case the bets go awry.
Similarly, in case a company has the ability to repay, through its foreign earnings, it must also be allowed to convert its rupee loans into ECBs, Jain said. Dhoot claimed Subbarao welcomed the suggestions and assured the delegation their request would be looked into.
As part of its move to boost investor confidence, RBI took a host of measures last month, including raising ECB limits for the country’s companies.
Assocham also requested for an interest subvention of two per cent for loans to small businesses like the ones given to the agricultural sector.
Further, it has sought sentiment-reviving measures like an immediate cut of one per cent each in the key lending rate and the cash reserve ratio in the next policy, among other things.