India Inc''s ECBs crosses govt''s $22-b internal cap

The government''s fears on excessive inflows of foreign funds are not baseless. Debt mobilized by Indian companies through external commercial borrowings (ECBs) is now estimated to have totalled $24 billion in the previous fiscal. This is almost 10% higher than the government''s internal cap of $22 billion, fixed for the previous fiscal. Given that the cap is not really enforceable since majority of the capital raised overseas comes through the automatic route, the ceiling only indicates the government''s comfort level for foreign fund inflows in a particular year. Though, RBI has not formally released the figures yet, sources said that gross foreign fund inflows through the ECB window in the last fiscal were at $24 billion. The central bank has, so far, released figures for capital raised through ECBs up to February 2007. According to these figures, about 812 companies have raised about $20.24 billion through ECBs in the April 2006-February 2007 period. In a bid to check excessive inflows, the government on May 18 shut the ECB window for the real estate sector while lowering the cap on interest rates at which companies can raise loans abroad, thereby weeding out smaller players that are unable to tap cheap credit on account of low credit ratings.