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HindustanTimes Sun,20 Apr 2014

ECB flows may choke as banks hit their limits

Anupama Airy , Hindustan Times  New Delhi, October 18, 2013
First Published: 00:23 IST(18/10/2013) | Last Updated: 00:26 IST(18/10/2013)

Indian public sector units including Fortune 500 oil companies have informed the government that fund-raising from foreign markets through external commercial borrowings (ECBs) in October-March 2013-14 is likely to be hit as a sudden glut of Indian paper in the market is fast exhausting the country-specific limits set by foreign banks.

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“During the recently concluded roadshows for $500 million syndication, the company has been given to understand by various banks that due to this glut of Indian paper in the market, country limits of foreign banks are being exhausted very fast and this scenario may adversely affect our further attempts to raise ECBs during the current financial year,” said Indian Oil Corporation (IOC) in a recent communiqué (dated October 8) to the ministries of finance and petroleum.

At present, many Indian PSUs are in the market to raise ECBs and from the oil sector alone, most companies including ONGC Videsh Ltd (OVL), Hindustan Petroleum Corp Ltd (HPCL), Bharat Petroleum Corp Ltd (BPCL) and Oil India Ltd besides IOC are in the market to raise funds through the mode.

The government, which is battling a high fiscal and current account deficit (CAD), has asked most state-owned firms to raise funds via the ECB route. Oil PSUs alone are slated to raise over $4 billion (Rs 25,000 crore) or more of funds during the remaining six months of 2013-14 through ECBs.

Finance minister P Chidambaram has said that CAD  — the difference between dollar inflows and outflows — would be contained at $70 billion in 2013-14 and making PSUs raise funds via the ECB route is one such step.

The finance ministry has assured “full regulatory support” for this exercise including fast tracking clearances from RBI for the same.

IOC, the largest importer of crude oil, has been mandated to raise close to $1.8-2 billion while HPCL and BPCL have been asked to raise $1 billion each.

“We are on a lookout for conducive markets,” a senior IOC official said.

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