RBI tightens borrowing norms

Tight-ening borrowing norms for India Inc, the Reserve Bank of India has decided to discontinue with the facility for buyback of foreign currency convertible bonds (FCCBs) by Indian companies with effect from January 1, 2010.
“Keeping in view the prevailing macroeconomic conditions and global developments, especially the improvements in the stock prices, it has been decided to discontinue the facility with effect from January 1, 2010”, the notification said.
The bank also re-imposed an all-inclusive interest ceiling for external commerical borrowings (ECBs) under the approval route of 300 basis points above London interbank offered rate — the benchmark for global borrowings and lendings — for loans with tenure of three to five years.
The all-inclusive ceiling for loans with a maturity of more than five years would be 500 basis points.
The central bank, however, relaxed the borrowing norms for telecom companies, which are bidding for third generation (3G) mobile spectrum.
The 3G spectrum is scheduled to be auctioned on January 14, the central bank said in a notification on Wednesday.
Accessing the ECB route to raise money to participate in the 3G spectrum auction has been the long-standing demand of telcom companies. They need big money to take part in the auction as the reserve price is fixed at Rs 3,500 crore.
The RBI also extended the time for raising overseas funds for developing integrated townships under the approval route. Now, the facility is extended to December 31, 2010.

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