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Reform, do not rationalise

It is time we shed India's complex foreign debt policy framework in favour of a coherent one that addresses the potential market failures arising from unhedged foreign currency debt

Topics
Reserve Bank Of India  |  Foreign Portfolio Investment  |  Rationalise Regulatory Framework

Bhargavi Zaveri & Radhika Pandey 



Bhargavi Zaveri & Radhika Pandey

On April 27, 2018, the (RBI) published two circulars purporting to rationalise and liberalise the regulatory framework governing foreign borrowings by Indian residents. Briefly summarised, these circulars make four important changes. First, they re-allow foreign investors to invest in Indian debt with a maturity period of less than three years. Second, they impose a uniform all-in-cost ceiling (cap) on the return that Indian entities may promise to foreign lenders. Third, they expand the list of ‘eligible’ borrowers permitted to raise foreign currency debt. Fourth, they prescribe a uniform list of end-uses that foreign debt must not be deployed towards.

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First Published: Mon, May 07 2018. 05:53 IST

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