Overseas borrowed funds : RBI says overseas borrowed funds can be parked with banks in India

Mint – Sat, Nov 22, 2014

The borrowers are required to bring the proceeds meant for rupee expenditure such as payment for spectrum allocation, capital goods into India

 Reserve Bank of India (RBI) on Friday allowed companies borrowing overseas to park the funds as term deposits with local banks for a maximum period of six months.

In a notification on its website, the central bank said this facility is available for entities that have borrowed funds for permitted end uses such as local sourcing of capital gods, on-lending to self-help groups or micro-credit and payment for spectrum allocation, among others.

"No charge in any form should be created on such term deposits i.e. to say that the term deposits should be kept unencumbered during their currency," RBI said in its notification.

Such deposits should be exclusively in the name of the borrower and they should be available for liquidation as and when required, the regulator said.

RBI stated that the amended policy would come into immediate effect and all other aspects of the external commercial borrowing (ECB) policy would remain unchanged.

On 3 September, the banking regulator had eased certain ECB norms by allowing non-resident lenders to extend rupee loans to borrowers in India, after following certain norms regarding currency swaps with local banks. Prior to that, all eligible borrowers were allowed to raise ECB funds in rupees only from their foreign equity holders.

As per latest monthly data available on the RBI website, Indian corporate entities borrowed $2.56 billion worth of ECB loans in October 2014. Of this, Reliance Jio Infocomm Ltd and Tata Motors Ltd had both borrowed $750 million each through the ECB route.