Govt not to impose restrictions on foreign borrowings

Last Updated: Thursday, November 19, 2009 - 17:54

New Delhi: The government today ruled out
limiting companies from borrowing money from overseas market
and said that the surge in foreign money is not a matter of
concern at present.

"There is no such proposal," Finance Secretary Ashok
Chawla told reporters when asked about speculations that the
government might ask corporates to bid for External Commercial
Borrowings.

Media reports suggested that government could limit the
number of companies for the purpose of tapping overseas market
for funds.

Currently, companies are allowed to raise 500 million
dollars annually under the automatic route while
infrastructure firms under the approval route can remit up to
100 million dollars for rupee expenditure. For other companies
the cap on approval route remittance is set at 50 million
dollars.

Capital inflows have reached record levels as investors
borrow cheap from advanced countries and invest in high-
yielding assets in developing countries.

This has led to speculations that the government might
put in place a system of auctioning ECBs, so that excess flow
of money through commercial borrowings is checked.

In India, foreign inflows through FIIs (foreign
institutional investors), ECBs and FCCBs (foreign currency
convertible bonds) have been on the rise, while FDI is not
picking up as fast.

Bureau Report

First Published: Thursday, November 19, 2009 - 17:54

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