After two rounds of relaxations in external commercial borrowing rules for infrastructure firms, the finance ministry may ease norms for Indian non-infrastructure companies, especially those in manufacturing. These companies are currently allowed to borrow only up to $50 million for rupee expenditure.
The ministry may also allow foreign institutional investors to put more money in corporate and government debt instruments. At present, FIIs are allowed to invest up to $8 billion in the Indian debt market, of which $3 billion can be invested in corporate debt and $5 billion in government securities.
The finance ministry has also advised public sector banks to provide more liquidity to domestic mutual funds to meet redemption pressures.
These policies are being considered against the global financial crunch that has impacted lending across the world, including India. Over the past fortnight, the government has relaxed overseas borrowing norms twice for infrastructure firms.
The government may also raise the upper interest rate ceiling to enable the companies to borrow long-term funds at globally competitive rates.
On September 22, the ministry had raised the ECB limit from $100 million to $500 million for rupee expenditure by infrastructure companies. It also raised the upper ceiling of interest rate on such ECBs by 100 basis points for loans over seven years. On October 7, the government added mining, exploration and refineries to the list of infrastructure firms allowed to borrow up to $500 million overseas.