In a major move, the government has decided to increase the overseas borrowing limit by any corporate to $750 million from the current $500 million under the automatic route, offering a window of cheaper credit for the liquidity-hit Indian industry.
The government has also decided to allow domestic corporations to raise overseas loans in Chinese Renminbi (RMB).However, RMB, also called yuan, is not a convertible currency and authorities would have look into issues to address currency risks, a senior finance ministry official said.
“The cost of borrowing in the domestic market is high and the move would address the issue,” said R Gopalan, secretary, economic affairs. "For the first time, we are taking yuan as a currency and there will be a limit of $1 billion to begin with."
The cost of borrowing from China is far less and this would provide the much-needed boost to Indian companies, a finance ministry official said.
Captains of the industry who met finance minister Pranab Mukherjee on August 1 had demanded the increase in the ECB limit in the wake of rising interest rates.
The government has also decided to allow firms to refinance rupee debt through overseas borrowing. However, it retained the $30-billion cap on overseas borrowing limit in a fiscal year.
Indian companies have raised debt of about $16 billion during the April-July period from offshore markets. Finance minister Pranab Mukherjee will hold review meetings on these issues with various other ministries beginning September 29.
Also read: Chinese bank opens in Mumbai