The government on Wednesday said it is contemplating relaxing norms governing external commercial borrowings to enable Indian corporates access higher foreign capital at low cost.
Besides, a review is underway to remove restrictions on Foreign Currency Convertible Bonds for which announcement will be made at an appropriate time, U K Sinha, joint secretary (Foreign Direct Investment and ECB) in the finance ministry, said at a seminar on Foreign Exchange Management Act.
Sinha said restrictive measures are still applied on FCCBs under Foreign Exchange Management Act and needed to be softened.
The finance ministry has already applied its mind on the issue, he said.
Sinha also said that his ministry was in favour of a cap on restricted rate of interest for overseas borrowings for Indian companies so that they can access these borrowings at lower cost and high cost external borrowing is discouraged.
Since the present ECB norms are too restrictive to encourage Indian corporates raise substantial borrowings from overseas, the issue is actively being reviewed by the officials in the ministry, he said.
Sinha, however, made it clear that the government would not allow unrestricted interest rate regime in ECBs in view of East Asian meltdown, caused by high interest rates and short duration of such borrowings in late 1990s.