Allow NBFCs to access ECBs freely: chamber

Special Correspondent

NEW DELHI: The non-banking finance companies (NBFCs) should be allowed to access ECBs (external commercial bank) freely and utilise them with no pre-conditions for providing the much-needed long-term capital to industry.

A recomendation to this effect has been made by the Associated Chambers of Commerce and Industry of India (Assocham) has called for policy changes to allow ECB with minimum average maturity of three years raised by NBFCs from multilateral financial institutions and reputable regional financial institutions.

Under the current policy, normal corporates are allowed to raise ECBs up to Rs. 50 crore without any eligibility criteria. Non-governmental organisations (NGOs) involved in micro financing activities are also allowed to access ECBs freely. These are entities not regulated by the Reserve Bank of India (RBI), whereas NBFCs are well regulated by RBI.

Project financing

According to Assocham chief, Anil K. Agarwal, several amendments to the policy that took place are defeating the very objectives, which were to be achieved.

For instance, he said the amendment allowed NBFCs to raise ECBs for import of infrastructure equipment for onward leasing to infrastructure projects and not for direct funding of infrastructure projects.

With a national thrust on infrastructure building, all NBFCs should be allowed to access ECBs for funding both equipment and projects, because both needed to be funded in tandem, he said adding that for NBFCs, ECBs were a source for tapping long-term funds at low interest rates.