In a First, Companies allowed to raise $ 1 billion External Commercial Borrowings (ECBs) in Yuan

The Union Government on 15 September 2011 decided to allow corporates to raise external commercial borrowings (ECBs) in yuan (Renminbi) equivalent to $1 billion to help companies who are trading with China. For the first time yuan (Renminbi), (equivalent of $1 billion) was allowed as an acceptable currency under the ECB. So far, the government had allowed firms to raise external commercial borrowings (ECBs) only in US dollar, Japanese yen, euro and British pound. The decision to allow companies to raise ECBs in yuan is expected to benefit infrastructure firms such as ADAG Group company Reliance Power and Lanco Infratech.

The Cabinet Committee on Economic Affairs did not raise the overall ceiling of ECB, which is now at $30 billion. However, the committee decided to relax the norms and raise the borrowing limits for various sectors to help companies obtain funds from overseas markets at competitive rates. Out of the total limit of $30 billion, ECBs amounting to $15.93 billion have been raised by companies until August 2011.

The limit of external borrowings with tenure of five years or more under the automatic route had been increased from $500 million to $750 million. The government allowed corporate houses to borrow up to $750 million without seeking approval from the Reserve Bank of India. The decision would help companies across all segments to access higher quantum of overseas funds. For the services sector, the ECB limit under the automatic route had been doubled to $200 million and for NGOs from $5 million to $10 million.

The government allowed companies to refinance rupee debt through ECBs, but retained the cap at $30 billion on overseas borrowing during a financial year. 25 per cent of the amount raised from overseas sources could be used to repay debts for infrastructure sector projects. The refinancing of buyers/suppliers credit through ECB would be permitted for infrastructure projects/capital goods.