India Inc today cautiously welcomed the RBI’s move to modify the ECB guidelines and said this also indicates a gradual withdrawal of stimulus measures announced to help the industry tide over the global credit crunch last year.
Industry body Ficci said that the Reserve Bank’s step may make availability of funds through external commercial borrowing route more expensive.
“The ECB route is frequently used by SMEs for raising funds, which are even otherwise available at a high price from the domestic banking system,” it said.
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It also said that the relaxation of certain ECB norms given by the RBI during the liquidity crisis period to India Inc have been gradually withdrawn “which is an indicator of a gradual withdrawal of the stimulus package.”
Echoing the view, CII said that RBI’s steps are an indication of slowly unwinding of the liquidity enhancing measures. However, it said, “These measures should not be seen as a precursor to monetary tightening through a rate hike.”
The chamber, however, welcomed the central bank’s decision to allow NBFCs exclusively involved in financing infrastructure projects to avail of ECBs. “The inclusion of telecom companies raising debt for 3G licenses, in this category is welcome.”
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RBI yesterday made it easy for telecom companies bidding for third generation (3G) mobile spectrum to borrow money from abroad, while tightening the norms for others.
Assocham said that the stimulus package has shown the desired impact and needs to be continued including the easing measures unveiled last year at the peak of global financial crisis for foreign borrowings.
“The RBI with its reintroduction of price ceiling on overseas borrowings is likely to give negative signals and may be taken seriously by the market towards a major step to roll over a part of the government initiatives,” it said.
Industry body PHDCCI welcomes the RBI’s decision to allow NBFCs involved in financing core sector projects to avail of ECB under the approval route.
“Though RBI has moved towards restricting ECB for businesses beyond specified projects, this should be extended to some more sectors, including projects coming up in infrastructure sector as investment in this sector is urgently needed,” PHDCCI President Satish Bagrodia said.
To tide over the global financial crisis, the government has announced stimulus packages in December 2008 and January 2009.
The government cut excise duty by six per cent and service tax by 2 per cent in phases, while stepping up plan expenditure to prop up the economy, facing the impact of global financial crisis.