NEW DELHI: The finance ministry on Wednesday reviewed its policy on external commercial borrowings (ECBs), allowing developers of special economic zones (SEZ) to access cheaper funds from abroad for infrastructure development in the zone.
Permitted through the approval route, the relaxation in rules will help SEZ developers bring down their development cost to a large extent. However, it has been clarified that ECB will not be permissible for development of integrated township and commercial real estate within the SEZ.
So far, ECBs were permissible for the infrastructure sector that was defined as power, telecommunication, railways, road and bridges, ports, industrial parks, mining, refining and exploration and urban infrastructure projects.
As per the current policy, ECBs are allowed for units in SEZ for their own requirements, not for development of the zone.
Further, the government has clarified that corporates which had been under investigation by the Enforcement Directorate and the Reserve Bank of India for violation of foreign exchange rules would have to compulsorily go through the approval route and would not be allowed under the automatic route.
Other aspects of the ECB policy such as $500 million limit per company per financial year under the automatic route, average maturity period, guidelines on the end-use and lender and reporting arrangements have not been changed by government.
The government also extended the relaxation given to real estate developers outside SEZ for use of ECB for development of integrated townships, permitted in January 2009, till the end of this year under the approval route.
Non-banking finance companies (NBFCs), which are exclusively involved in financing of the infrastructure sector, are permitted to avail of ECBs from multilateral and regional financial institutions and government-owned financial institutions for on-lending in the infrastructure sector under the approval route.
Source:The Times Of India