No plans to cap overseas borrowings

The government today ruled out limiting companies from borrowing money from overseas market and said that the surge in foreign money is not a matter of concern at present. There is no such proposal, finance secretary Ashok Chawla told reporters when asked about speculations that the government might ask corporates to bid for external commercial borrowings (ECBs).

Media reports suggested that government could limit the number of companies for the purpose of tapping overseas market for funds. Currently,companies are allowed to raise $500 million annually under the automatic route while infrastructure firms under the approval route can remit up to $100 million for rupee expenditure. For other companies the cap on approval route remittance is set at $50 million.

Capital inflows have reached record levels as investors borrow cheap from advanced countries and invest in high- yielding assets in developing countries. This has led to speculations that the government might put in place a system of auctioning ECBs,so that excess flow of money through commercial borrowings is checked. In India,foreign inflows through FIIs (foreign institutional investors),ECBs and FCCBs (foreign currency convertible bonds) have been on the rise,while FDI is not picking up as fast.