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Liberalization in External Commercial Borrowings Policy during 2012-13

Liberalization in External Commercial Borrowings Policy during 2012-13

  • The important steps taken in the arena of external commercial borrowings (ECB) policy liberalization include:
  • Enhancing the limit for refinancing rupee loans through ECB from 25 per cent to 40 per cent for Indian companies in the power sector
  • Allowing ECB for capital expenditure on the maintenance and operation of toll systems for roads and highways so long as they are a part of the original project subject to certain conditions, and also for low cost housing projects
  • Reducing the withholding tax from 20 per cent to 5 per cent for a period of three years (July 2012- June 2015) on interest payments on ECBs
  • Introducing a new ECB scheme of US $10 billion for companies in the manufacturing and infrastructure sectors
  • Permitting the Small industries Development Bank (SIDBI) as an eligible borrower for accessing ECB for on-lending to the micro, small, and medium enterprises (MSME) sector subject to certain conditions .                                                         Liberalization in External Commercial Borrowings Policy during 2012-13
  • Permitting the National Housing Bank (NHB)/ Housing Finance Companies to avail themselves of ECBs for financing prospective owners of low cost / affordable housing units

Sovereign Credit Rating of India

  • India’s sovereign debt is usually rated by six major sovereign credit rating agencies (SCRAs).
  • These are Fitch Ratings, Moody’s Investors Service, Standard and Poor’s (S&P), Dominion Bond Rating Service (DBRS), Japanese Credit Rating Agency (JCRA), and Rating and Investment Information Inc., Tokyo (R&I).                    Liberalization in External Commercial Borrowings Policy during 2012-13
  • The government is taking a number of steps to improve its, interaction with the major OCP.As so that they make informed decisions.

Financial Stability and Development Council

  • With a view to strengthening and institutionalizing the mechanism for maintaining financial stability, enhancing inter-regulatory coordination, and promoting financial-sector development, the government has set up an apex level Financial Stability and Development Council (FSDC) in December 2010, in line with the G 20 initiatives.
  • The Council is chaired by the Finance Minister and has heads of financial-sector regulatory authorities, the Finance Secretary and/or Secretary, Department of Economic Affairs, Secretary, Department of Financial Services, and the Chief Economic Adviser as members.
  • Without prejudice to the autonomy of regulators, the Council monitors macro-prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial-sector development issues. It also focuses on financial literacy and financial inclusion.
  • In the eighth FSDC meeting held in October 2013, the council decided that regulators would voluntarily adopt governance enhancing recommendations that do not require legislative changes within a reasonably proximate timeframe.



Indian Economy

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