borrowings (ECB), as per which Indian subsidiaries of multinationals will be allowed to borrow from their global parents. Also, businesses that provide aircraft maintenance, repair and overhaul (MRO) services will be allowed to raise ECB, deeming them as airport infrastructure providers. The liberalised foreign borrowing norms could lead to an extra $2 billion in terms of debt inflow this fiscal. The Indian government and the corporate sector together have only raised $32 billion of ECB up to June out of the total $40 billion overall limit permitted by RBI, thereby not warranting a relaxation in the quantum of borrowing.
Incremental flows into NRI deposits will be exempt from the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) requirements, that will boost the dollar availability in the market. NRI deposits will also be exempt from priority sector lending requirements. RBI will also deregulate interest rates for term deposits of over three years under FCNR (Bank) accounts, making these an attractive investment option for NRIs.
Chidambarm also said that sovereign wealth funds (SWFs) will be given an option to invest under the private placement category up to 30% of the Rs 50,000 crore tax-free bonds that select state finance companies will be allowed to issue this fiscal. The finance ministry has, in the meantime, identified 13 entities to raise around Rs 48,000 crore worth tax-free bonds.
Also, state-owned institutions India Infrastructure Finance Company Ltd (IIFCL), Indian Railway Finance Corporation and Power Finance Corporation together are allowed to issue quasi-sovereign bonds to the tune of $4 billion. The government holds 73.72% in PFC, while IIFCL is fully owned by the government. IRFC is a subsidiary of Railways. IRFC will raise $1 billion, while the others will mobilise $1.5 billion each.
Samir Kanabar, partner, EY said India needs huge funds in infrastructure, be it in railways or power. “This is a good time to raise funds from abroad as the rupee has hit rock-bottom. Assuming that the rupee will strengthen in five years, Indian institutions stand to gain as they have to repay less in rupee terms. If the rupee gains 8%