Aug 12 2008
An increase likely in the rate cap for foreign borrowings
Overseas borrowing by Indian corporate in the future could be in store for some needed respite. If the government goes by its present stance then a revisit to the interest rate ceiling on these borrowings is likely. Though a complete relaxation on the overall interest cap would be what the corporate body would have really wanted this step too would come as a much needed relief to the Indian business community.
With global interest rates moving upwards the small companies were the ones who were finding it most hard to borrow money from overseas within the prescribed limit.
This ceiling was lowered by the government an year ago to curb foreign borrowings which were subsequently increasing the capital flow and hence pushing the Rupee up. Lowering this ceiling made it almost impossible for small companies to raise higher funds from overseas.
The present day statistics regarding foreign borrowing allowed in India states that Indian firms can now borrow up to $500 million per year. Manufacturing units are allowed to bring in $50 million in India while in the case of infrastructure companies this figure stands at $100 million for rupee expenditure while the remaining sum needs to be invested in overseas units.