The Government has permitted external commercial borrowings in China's Renminbi.

The Economic Affairs Secretary, Mr R. Gopalan, said corporates can borrow up to an equivalent of $1 billion in the Chinese currency. However, this limit will be a part of the overall ECB ceiling.

A senior official added that borrowing in the Chinese currency would be cheaper but the final rate of interest would depend on who is borrowing from whom and for what purpose. He cautioned that the hedging factor should be kept in mind as the Chinese currency was not fully convertible.

A major importer of Chinese capital goods, however, refused to comment on the likely benefits.

SECTORAL LIMIT

The Government also decided to increase the sectoral limit without changing the overall ECB ceiling (see Table 1). The current overall ceiling is $30 billion, of which Indian companies had raised $15.93 billion till August-end.

REFINANCE FACILITY

Mr Gopalan also said corporates can use ECBs for refinancing rupee-denominated loans. But this facility would be available only for infrastructure projects. It was also decided that 25 per cent of the amount raised through ECBs could be used to repay debt in existing projects, while the remaining 75 per cent would have to be deployed in new projects.

Another significant decision was about allowing refinance of buyers' and sellers' credit through ECBs in respect of infrastructure projects. This facility would be used only for capital goods, Mr Gopalan added.

He clarified that although the overall ceiling had not been raised, it could be reviewed if there were any demands, especially from the infrastructure sector.

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