RBI announces Measures to boost India’s Flagging Economy

TNI Bureau: The Reserve Bank of India (RBI) on Monday announced few measures to boost country’s flagging economy by hiking External commercial borrowing limit by $10 billion.

The central bank allowed the companies to borrow more from overseas to pay back their loans. It also allowed new category of investors like sovereign wealth funds, pension funds, insurance funds and foreign central banks to buy Indian government bonds.

As per the measures, the External commercial borrowing limit was hiked by $10 billion, which comes as a relief for the manufacturing sector. The government also enhanced the limit on foreign institutional investor investment in government securities by $ 5bn to $20 billion.

The RBI is a press release on Monday said, “It has been decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding Rupee loans towards capital expenditure and/or fresh Rupee capital expenditure under the approval route. The overall ceiling for such ECBs would be USD 10 billion”.

Earlier, finance minister Pranab Mukherjee had announced that the RBI is considering hiking the corporate bond foreign institutional investors (FIIs) limit to over $30 billion. He had said that the central bank is also considering a cut in withholding tax on corporate bonds.

Currently, foreign institutional investors can investment in Indian corporate bonds up to $20 billion. While the cap in government bonds is at $15 billion, FIIs are barred to invest in infrastructure bonds up to $25 billion.

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