Exim Bank to lend in rupees for investment abroad

This new financing window will enable the Indian companies to meet shortfalls in cash flows of their operations arising out of utilisation of the EEFC balances for equity contribution in overseas ventures, Exim Bank said. In terms of RBI guidelines governing overseas investment, equity contribution in overseas ventures can be made out of EEFC balances by Indian companies without prior reference to the RBI up to $ 15 million.

Exim Bank said, given the strong linkage between international trade and investment flows, there was a need tosupport overseas investment by Indian companies to enable them to get easy access to technology, resources, markets on a global scale as a strategic response to emerging business opportunities worldwide as also to overcome non-tariff barriers.

Exim Bank said it has positioned itself to provide comprehensive support to such Indian companies who are endeavoring to globalise their operations. Other modes of equity contribution include remittance by purchasing foreign currency from authorised dealers against Indian rupees, export of plant & machinery and other goods and capitalisation of technical know-how fees and royalty. These modes require prior approval of RBI either under the automatic approval route up to $ 4 million subject to compliance with applicable conditions or through approval for investments up to $ 15 million by the special committee at RBI.

Exim Bank has so far supported 77 Indian companies for equity investments in 90 ventures in 34 countries by way of overseas investment finance of aboutRs 800 crore. These ventures cover manufacturing, marketing and trading activities and are spread over Africa, Asia, Europe and USA.

The acquisition of overseas companies by Indian corporates is also financed by Exim Bank. The bank was recently authorised by central government to take direct equity participation in ventures of Indian companies overseas.

In August 1998, Exim Bank introduced a lending programme for providing term loans to Indian companies for on-lending to their ventures overseas. In addition, Exim Bank can issue guarantees on behalf of Indian ventures abroad to enable them to raise working capital or other finance locally. Thus, Exim Bank said, it is now is a position to offer a comprehensive financing package comprising, equity, loan and guarantee to support overseas ventures of Indian companies.