RBI loosens curbs on companies’ offshore borrowing, move likely to support rupee

The rupee has fallen by almost 2 percent so far in 2019, the most among its regional peers, continuing its bear run from last year. The RBI’s new governor Shaktikanta Das, who was appointed by the government in November after his predecessor Urjit Patel resigned abruptly, has relaxed some measures to support growth including a one-time dispensation scheme for small borrowers.

The Reserve Bank of India relaxed offshore borrowing rules for companies and financial institutions on Wednesday, a move that is likely to boost the rupee exchange rate.

The Reserve Bank of India relaxed offshore borrowing rules for companies and financial institutions on Wednesday, a move that is likely to boost the rupee exchange rate. (Reuters File Photo)

Indian borrowers can now raise funds from offshore markets for at least three years without any ceiling on the amount.

Previously, the RBI had only allowed companies to borrow up to $50 million for three years. For funds beyond $50 million companies had to borrow for at least five years.

In addition, the RBI is also allowing manufacturing companies to raise up to $50 million from overseas lenders for one year compared to the previous minimum maturity rule of three years.

“This is a rupee-positive move and will also give lot of flexibility for companies to raise bonds overseas,” said a debt investment banker at a foreign bank.

The rupee has fallen by almost 2 percent so far in 2019, the most among its regional peers, continuing its bear run from last year.

The RBI’s new governor Shaktikanta Das, who was appointed by the government in November after his predecessor Urjit Patel resigned abruptly, has relaxed some measures to support growth including a one-time dispensation scheme for small borrowers.

The RBI under Das could also agree to give an interim dividend to the government to fund a wide fiscal deficit.

He has also promised to maintain adequate liquidity to address any financial crunch in the system.