Finance ministry officials and the officials of Reserve Bank of India plan to hold a meeting in this week. This is to discuss about relaxing the ECB norms for boosting the affordable housing.
The finance ministry and the Central Bank plan to initiate some relaxations in the ECB norms. By this, they aim to boost affordable housing development.
The decision will be taken in the meeting which will be held by the end of this week. The officials of finance ministry and the Reserve Bank of India will attend the meeting.
External commercial borrowing is an easy way for the developers to raise fund for their projects. Moreover it is more economical as they are able to raise fund from the foreign investors who seldom charge higher amounts. In most of the times the cost of these borrowings are lower than the loans from India.
Last year too, RBI had relaxed some ECB norms for boosting affordable housing segment. This relaxation was implemented in December 2012. As per this revised ECB policy, the builders were permitted to raise funds through ECBs. They could raise funds up to $1 billion.
The available data with the Reserve Bank of India, Indian companies have raised $2.1 billion till February this year. However this is lower in comparison to the same period in the previous year. During this period, $2.6 billion was raised.
ECB is used mainly by the big corporates. However the public companies also use these schemes to raise fund.
One of the main attractions of this kind of borrowing is that they are more economical. While the interest rates are higher in India, it is lower in many other countries. So receiving loans from these countries, the big corporate and public sector undertakings can save a good amount.
The decision to relax ECB norms is highly significant in the current situation. The prime aim is to boost affordable housing. But the Indian economy as a whole may benefit from this decision.
