The officials of the finance ministry and of RBI will hold a meeting this week to discuss about relaxing the norms for external commercial borrowing (ECB). The relaxation may boost the affordable housing projects.
To discuss about how to imply relaxation on the norms related to external commercial borrowing (ECB), officials from both Finance ministry and the Reserve Bank of India, may meet this week.
The main thrust of the meeting will be relaxation of ECB norms. The ministry and the apex bank, however, think of relaxing the ECB norms only for the affordable or low-cost housing sector.
A senior finance ministry official said that the ministry is likely to meet the RBI officials. The official added that the meeting aims to find ways to ease the norms for raising funds through ECB.
The meeting is significant as the current account deficit (CAD) of India has reached a record 6.7% of GDP. It reached the record level in the last quarter of 2012 which witnessed heavy import of gold and oil.
External commercial borrowing is a useful method for the Indian corporates to raise funds from the foreigners. Besides corporations, public sector undertakings also raise fund through ECB policy.
By availing foreign funds, the corporates can cut short the higher interest rates existing in India. This is one of the major benefits of ECB. It means that loan cost is lower.
In December 2012, Reserve Bank of India had permitted real estate firms to raise funds through ECBs. However the firms could raise funds only up to one billion USD.
This was mainly to promote more affordable housing projects. As per the available data with the apex bank, Indian companies have raised $2.1 billion in this February. This is lower than the $2.6 billion raised in the same period last year.