ECB move to help once mkts stabilise

Economy Bureau
Posted: Saturday, Jan 03, 2009 at 2255 hrs IST
Updated: Saturday, Jan 03, 2009 at 2255 hrs IST

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New Delhi: this borrowing channel. Even top notch companies may have to pay higher interest rates to obtain these funds, analysts said.

The other two relaxations for realty and infra financing NBFCs mean RBI and the government has given up their reticence of closing this window for these two sectors in response to a difficult credit conditions at home. The RBI has shut the ECB channel for integrated townships for the fear it could stoke a real estate bubble. NBFCs were not allowed to raise ECBs as it complicates capital account management and exposes these companies to currency risk.

Real estate developers said ECBs can be accessed at rates in the range of 5-10%. “I think the interest costs could be close to 10%,” an executive of a leading real estate company said asking not to be named. The executive said he needed to discuss with his CFO whether funds would be available outside. “With the sector facing so much of liquidity crisis, this government measure is going to help us in a big way,” said an Omaxe official. The crisis in the global financial markets has surely reduced the funds availability to India Inc. Total funds raised through ECBs by Indian companies have fallen by 30.87% to $17.83 billion in 2008 from $25.79 billion in 2007. Even there is a drop of number of ECBs from 680 in 2007 to 410 in 2008. “External credit that corporates were using has dried up,” Planning Commission deputy chairman Montek Singh Ahluwalia said on Friday....

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