ECB guidelines modified to boost exports

NEW DELHI, April 7: In its first major economic policy decision, the BJP-led government today changed the external commercial borrowings EC...

NEW DELHI, April 7: In its first major economic policy decision, the BJP-led government today changed the external commercial borrowings ECB guidelines for 1998-99, in the face of the south-east Asian currency crisis.

The ECB modifications, aimed at giving a boost to sagging exports and a thrust to the infrastructure sector, included reduction in the average maturity for ECB for export and shipping sectors to five years from the current seven years for proposals above 15 million dollars. The changes are effective from April 1 this year. An official press release said corporates would be allowed one-time extension of one month for all approvals which lapse between April 1 and April 30 because of the longer time taken for financial closure due to the impact of the south-east Asian currency crisis in the international markets.This would, however, be applicable only to those approvals which are valid according to the existing guidelines as on April 30, 1998.

Prepayment facility would also be permitted upto 20 per cent of the present balance outstanding of each ECB across the board for all maturities. Other aspects of existing ECB policy including long-term maturing window and infrastructure sectors would continue.

Regarding companies holding ECB abroad, the release said the RBI guidelines would have to be strictly adhered to. The central bank has also been empowered to monitor the companies.

As many as 260 ECB approvals were made under the normal window in 1997-98 amounting to 9.31 billion dollars. Of which, 40 were in the power sector amounting 3.01 billion dollars followed by telecom with 16 approvals amounting to 1.54 billion dollars. Shipping and civil aviation followed next.

During 1997-98 the ECB approvals under three million dollar scheme was 895 million dollars and under the long-term maturity window was 2.95 billion dollars.

Fifty per cent of the ECB approvals under the normal window went to the infrastructure sector like power and telecom and 18 per cent to the export sector.

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Thegovernment acknowledged that some of the steps taken in the previous ECB review in June 1997 had helped avoiding the difficulties which some of the east Asian countries were currently facing. These steps included longer maturity for longer ECB borrowing, caps on borrowing cost and restrictions on end use of ECBs.