India unlikely to restrict companies' overseas borrowings: official
19 Nov 2009
The government has no plans to clamp down on overseas borrowings by Indian companies despite a surge in the inflow of foreign money, a top finance ministry official said today.
"There is no such proposal," finance secretary Ashok Chawla said clarifying on speculations that the government might restrict external commercial borrowings by companies.
Indian companies are allowed to raise up to $500 million dollars annually under the automatic route while infrastructure firms under the approval route can remit up to $100 million for rupee expenditure. Other companies are allowed to remit up to $50 million through the approval route.
Media reports speculated on possible government restrictions on external commercial borrowings by companies in the face of rising inflows of foreign funds.
Investors borrow cheap from advanced countries and investing in high-yielding Indian assets have caused a surge in the inflow of foreign funds into the country.
Reports said the government might introduce a system of auctioning ECBs in order to check excess flow of money through commercial borrowings.
Besides investments by foreign institutional investors (FIIs), Indian investors can tap external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) for raising capital.