Mumbai: The Reserve Bank Tuesday said it has allowed Small Industries Development Bank of India (SIDBI) to raise up to USD 500 million per annum (about Rs 2,700 crore) through External Commercial Borrowing (ECB) to fund small and medium scale industry.
"...It has been decided to include SIDBI as an eligible borrower for availing of ECB for on-lending to MSME sector," RBI said in a notification.
Funds raised by SIDBI in turn would be used for lending to the Micro, Small and Medium Enterprises (MSME) directly either in INR or in foreign currency.
The move would help SIDBI to access low cost funds from overseas market where interest rate are relatively low. Thus, the MSME sector would also get access to funds at lower interest rate.
The foreign currency risk would be hedged by SIDBI in full in case of on-lending to MSME sector in INR, it said.
"Availment of ECBs, including the outstanding ECBs, up to 50 per cent of their owned funds, for on-lending to MSME sector, will be under the automatic route and beyond 50 per cent of owned funds, will be under the approval route, subject to a ceiling of USD 500 million per financial year," it said.
The amended ECB policy shall come into force with immediate effect and is subject to review based on the experience gained in this regard, it said.
All other conditions of ECB, such as recognized lender, all- in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements would remain unchanged, it said.
First Published: Tuesday, November 06, 2012, 22:58