A government panel is likely to propose a common external commercial borrowing (ECB) cap for entities across sectors besides an increase in the interest rate limit for these overseas loans. The move is expected to boost capital flows into software firms, hospitals and hotels.

The Sahoo committee, set up to review and liberalise global depository receipt (GDR) norms for Indian companies looking to raise investment abroad, has also been tasked with recommending how ECB norms could be streamlined further.

The panel had its first meeting with infrastructure companies and bankers in Mumbai on January 16 and will submit its recommendations to finance minister P Chidambaram by April.

?Since the panel is looking at uniformity in ECB norms, it may propose that all sectors have the same upper limit for ECBs, irrespective of whether they are service or infrastructure companies,? a government official told FE.

As per RBI norms, the maximum amount of ECB that can be raised by a corporate other than those in the hotel, hospital and software sectors is $750 million or its equivalent during a financial year, subject to permissible end uses. In the three services mentioned above, however, the upper limit for ECB is lower at $200 million or its equivalent. And there are separate limits for micro-finance institutions and non-banking financial companies where ECBs are limited even more.

Sources said the panel is likely to recommend that the three service sectors may be brought on par with infrastructure sectors by raising the upper ECB limit.

Another change which the committee may consider is to increase the caps of cost of borrowing for these overseas loans.

Currently for a period of three to five years, Indian firms are allowed to avail of ECB at rates not higher than London interbank offered rate (LIBOR) plus 350 basis points, while for a five-year loan, the highest rate permitted is LIBOR plus 500 basis points.

?Say a company wants to borrow for three years at a time when LIBOR is at 3%. The cost of borrowing will then be 6.5%. But what if most international lenders are willing to only lend at 7-9% or even more. This may create hurdles for the company. Hence, the panel may suggest increasing the limit,? the official said.

The idea is that if companies find the ECBs attractive at slightly higher rates, there is no need for them to be forbidden.

The person added that this issue was raised in their first meeting with representatives from HSBC, Citi, BofA-Merrill Lynch, the stock exchanges and Adani and Essar groups on January 16. The committee will hold more such meetings with other companies and bankers in February and March. The panel is headed by MS Sahoo, former Sebi member and, currently, secretary, Institute of Company Secretaries of India. It comprises 10 members drawn from RBI, Sebi, the capital markets division of the finance ministry and independent think-tanks.

Indian companies have got in $19.05 billion for April-November 2013 through the ECB/FCCB route, either automatically, or with prior approval of the RBI. The last time that ECB norms were rationalized was in August 2013 for low-cost housing and the aviation sector.

ECB of up to $1 billion was allowed for airlines to meet their working capital requirements, while in low-cost housing, an aggregate limit of $1 billion in ECB was allowed for FY14 and FY15 each.