On a review of the current ECB policy, it has been decided, in consultation with the government to allow Indian companies which are in the infrastructure sector to avail of ECBs in renminbi (yuan), under the approval route, RBI said in a notification
Mumbai: The Reserve Bank of India (RBI) on Tuesday allowed infrastructure companies to raise funds in the Chinese currency yuan up to $1 billion to fund infrastructure development in the country, which requires investment to the tune of $1 trillion in next five years, reports PTI.
On a review of the current external commercial borrowing (ECB) policy, it has been decided, in consultation with the government of India, to allow Indian companies which are in the infrastructure sector, to avail of ECBs in renminbi (yuan), under the approval route, RBI said in a notification.
This is subject to an annual ceiling of $1 billion pending further review, it said.
Once approved, it said the approval of the RBI will be valid for a period of three months from the date of issue of the approval letter and the loan agreement should be executed within the validity period.
It is to be noted that the government has already said that the infrastructure sector requires investment of $1 trillion during the 12th Plan (2012-17). Of this 50% would come from the private sector.
Banks will be permitted to open Nostro accounts in renminbi (RMB). The designated bank shall monitor the end-use of funds and bank in India will not be permitted to provide any form of guarantee, it said.
The amended ECB policy will come into force with immediate effect and is subject to review, it said.
On Monday, the RBI relaxed ECB norms for the infrastructure companies with foreign stake.
Direct foreign equity holder (holding minimum 25% of the paid-up capital) and indirect foreign equity holder with at least 51% of the paid-up capital, will be permitted to provide credit enhancement for the domestic debt raised by Indian companies engaged exclusively in the development of infrastructure through issue of capital market instruments, it said.
It includes Infrastructure Finance Companies (IFCs) and no prior approval will be required from the RBI for providing such credit enhancements, it said.
The company fulfilling foreign equity criteria does not require permission for raising ECB up to $5 million.
“Bringing liquidity in the corporate bond market has been an issue for long. We may consider tax incentives, like doing away with the withholding tax, and reduction in stamp duty,” a finance ministry official said
New Delhi: The government is mulling tax incentives, reduction of stamp duty, and simplified regulatory norms to promote the corporate bond market for helping companies raise funds at competitive rates, reports PTI.
“Bringing liquidity in the corporate bond market has been an issue for long. The government is ready to put whatever is there to get it going. We may consider tax incentives, like doing away with the withholding tax, and reduction in stamp duty,” a finance ministry official said here.
The issues concerning corporate bond market were discussed at an internal meeting of the finance ministry on Tuesday.
The finance ministry, the official said, would also hold discussions with the representatives of financial institutions, like Morgan Stanley, ICICI Securities, PNB Gilts, AK Capital and Tata Group, on Thursday on the steps for boosting corporate bond market.
At present, government securities are preferred over corporate bonds as they enjoy sovereign guarantee and are highly liquid as compared to bonds.
A vibrant corporate bond market, as suggested by India Inc in its 1st August meeting with finance minister Pranab Mukherjee, would go a long way in meeting the infrastructure needs of the country.
The government envisages doubling of infrastructure spending to $1 trillion in the 12th Five Year Plan beginning 1 April 2012.
Sources said tax benefits could include reduction in Securities Transaction Tax (STT) and stamp duty, besides withdrawal of withholding tax.
“Development of corporate bond market is the most complicated policy issue being dealt by us. But we are keen to bring vibrancy in this segment,” the official said.
Earlier in March, the Securities and Exchange Board of India (SEBI) had constituted a 16-member committee to suggest a roadmap for developing the corporate bond market.
The finance ministry’s decision to monitor progress of large projects, which may include Dedicated Freight Corridor, was taken ahead of a meeting of secretaries of 11 important ministries like civil aviation, coal and mines, commerce and industry, communication and IT, agriculture and, environment and forest
New Delhi: Responding to India Inc’s concerns about the impact of poor infrastructure on growth, the finance ministry on Tuesday decided to monitor progress of 10-15 large projects in the public sector, reports PTI.
“The projects are yet to be identified, but it is important that infrastructure develops at a faster pace and we will be closely monitoring 10-15 large projects,” a senior official in the ministry said.
The finance ministry’s decision to monitor progress of large projects, which may include Dedicated Freight Corridor, was taken ahead of a meeting of secretaries of 11 important ministries like civil aviation, coal and mines, commerce and industry, communication and IT, agriculture and, environment and forest.
Captains of industry, in their interaction with finance minister Pranab Mukherjee on 1st August had demanded close monitoring of large infrastructure sector projects being undertaken by the public sector.
Yesterday’s meeting, which was chaired by economic affairs secretary R Gopalan, also decided to hold road shows abroad to portray India as an attractive investment destination.
“When interest rates are near zero in (developed) countries, we should try our best to attract funds,” the official added.
Ministry officials also deliberated on the steps required to make the corporate bond market more vibrant.
As various steps taken by the government failed to increase liquidity in the sector, strengthening of the corporate bond market could go a long way in financing infrastructure development in the country, the official said.
Wednesday’s inter-ministerial meeting would review the progress of different ministries on the suggestions made by corporate India.
“It is a pre-cursor to the meeting which would be taken by the finance minister in the second week of October where he would take stock of the progress,” the official said.
Besides other things, Indian industry had given suggestions to Mr Mukherjee on the steps needed to improve infrastructure and corporate bond market. Poor infrastructure is seen as a major bottleneck to sustain high level of economic growth.