New Delhi, August 15: The Confederation of Indian Industry (CII) on Tuesday urged the finance ministry to allow Indian financial institutions to fund investment requirements of wholly-owned subsidiaries and joint ventures set up by Indian companies overseas."It is critical for Indian companies to access Indian financial institutions for their funding requirements abroad to pursue their overseas investment strategies in a most effective manner," the chamber said in a letter to Finance Minister Yashwant Sinha.The chamber said Indian companies were exploring globalisation possibilities, but were facing constraints relating to availability as well as pricing of offshore debt from international financiers to fund such transactions. "Lack of a foreign currency balance sheet and lack of an overseas performance track record of these Indian companies is hindering availability of funds at competitive cost in the international market," it said.Several sectors of the Indian economy with significant global competitive advantages, are actively looking for strong value creation opportunities through overseas investments, CII said while citing instances of sectors including information technology, pharmaceuticals, textiles and food processing.The keen interest being taken by Indian companies in overseas investments is also demonstrated by the increase in the level of overseas direct investment approved by the RBI from $ 235 million in 1996 to over $ 801 million in 1999, the chamber said.CII said that many Indian financial institutions were willing to extend credit overseas but were constrained by RBI guidelines on overseas lending. Currently, only banks are allowed to extend credit overseas to the extent of five per cent of their unimpaired tier-I capital out of their foreign currency accounts, it said.CII further pointed out that it was common practice that globalisation efforts of any company were initially supported by the home-country banks of that corporate and the same should be followed in India.Indian financiers have a better understanding of the company's business and appreciation of the quality of the credit, CII said. The chamber further said that Indian financiers have the ability to effectively look at the combined strengths of the Indian and overseas entities, so as to structure an optimal financing package in a manner which would not be possible by an international intermediary."Our financial institutions are ideally positioned to evaluate long-term viability and extend credit for these overseas investments since they have built up considerable appraisal skills," it said.
