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Govt raises ECB limit, eases norms

The government has decided to raise the limit for external commercial borrowings to $30 billion from the current $20 billion, a finance ministry official said on Friday.

business Updated: May 28, 2011 01:18 IST
Reuters & PTI

The government has decided to raise the limit for external commercial borrowings to $30 billion from the current $20 billion, a finance ministry official said on Friday.

The government has decided not to raise the foreign institutional investor limit in government bonds, the official said.

Foreign institutional investors (FIIs) can invest up to $10 billion in government bonds currently.

Meanwhile, in order to encourage Indian companies to expand their global footprint, the Reserve Bank of India (RBI) on Friday relaxed norms for overseas direct investments.

Under the modified norms, only 50% of the amount of performance guarantee provided by Indian companies to overseas ventures will be taken into account while computing the overall exposure limit. Indian companies are allowed financial commitments in overseas ventures up to 400% of their net worth. Under the old norms, 100% of the performance guarantee is taken into account while calculating the overall exposure limit of an Indian company.

Companies will also be permitted to raise their overseas exposure to beyond 400% limit with the RBI's prior approval.

The RBI has decided to allow companies to write-off capital and other receivables such as loans, royalty, technical know-how fees and management fees in respect to those joint ventures and wholly-owned subsidiaries in which they have more than 51% stake.

"It is a welcome step and will help companies grow on a global stage," said Ashvin Parekh, partner and national leader, financial services, Ernst & Young.