The Hindu : Business : ECB norms liberalised for Special Economic Zones

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ECB norms liberalised for Special Economic Zones

Special Correspondent

NBFCs involved in financing infrastructure sector allowed to avail of ECBs from multilateral, other financial institutions

NEW DELHI: In a significant liberalisation, the Government has modified its policy on external commercial borrowings (ECBs) to suit the funding requirements of corporates, developers of integrated townships and special economic zones (SEZs) and non-banking financial companies (NBFCs) engaged in infrastructure development.

According to an official statement here, the changes in the ECB policy have been carried in consultation with the Reserve Bank of India (RBI) in keeping with the evolving macroeconomic environment, sectoral requirements and global developments.

As per the extant policy, while the utilisation of ECB proceeds for the real estate sector is not permitted, it is allowed for the development of integrated townships as a sector specific measure since January this year. In view of the prevailing conditions, “it has been decided to continue the existing policy of permitting development of integrated township as a permissible end-use, under the approval route, until December 2009,” the statement said.

Likewise, under the current norms, NBFCs exclusively involved in financing of the infrastructure sector are permitted to avail of ECBs from multilateral and other financial institutions and Government owned development financial institutions for on-lending to borrowers under the approval route. This, however, is subject to the condition that the direct lending portfolio of the eligible lenders vis-À-vis their total ECB lending to NBFCs, at any point of time should not be less than 3:1. On review of this policy last month, “it has now been decided to dispense with this condition with effect from July 1, 2009. The proposals, however, will continue be examined by the Reserve Bank under the Approval route, as hitherto.” the statement said.

Infrastructure

In the infrastructure sector, while ECB is permissible for power, telecommunication, railways, road including bridges, ports, industrial parks and urban infrastructure (water supply, sanitation and sewage projects), mining, refining and exploration, units in SEZs are also permitted to access ECBs for their own funding requirements.

However, ECB is not currently permissible for development of the SEZ.

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