India Increases External Commercial Borrowing Limit

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Jun. 1 – The Indian government has decided to raise the limit of external commercial borrowings to US$30 billion from the current US$20billion while, in another decision, the government has decided not to raise the foreign investor’s limits in government bonds. Presently, foreign institutional investors can invest up to US$10 billion in government bonds.

The Reserve Bank of India has also relaxed the norms for overseas direct investments to support Indian companies to expand their businesses internationally. Under the customized standards, only 50 percent of the amount of performance guarantee provided by Indian companies to overseas projects will be taken into account while calculating the overall exposure limit.

Indian companies are permitted financial commitments in overseas ventures up to 400 percent of their net worth. Under the old norms, 100 percent of the performance guarantee is taken into account while calculating the overall exposure limit of an Indian company. Companies can also increase their overseas exposure to above 400 percent limit with the Reserve Bank of India’s approval.

The RBI has determined to permit companies to write-off capital and other receivables such as loan royalties, technical know-how fees, and management fees in respect to those joint ventures and wholly-owned subsidiaries in which they have more than 51 percent stake.

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