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Allow Re-Finance Of Infrastructure Debts Through ECBs: AssochamBy ugesh sarkar, Section Finance & Taxes
Indian lenders especially for infrastructure sector including steel should be permitted to refinance their long-term debts through External Commercial Borrowings (ECBs) from 2010-11 to help them conveniently meet their long-term working capital requirements, industry body Assocham has said in its latest report.
In addition, the Chamber has also suggested that commercial banks be permitted to raise long-term bonds from NRI's say for a period of 10 years to garner funds for infrastructure sector. Besides, it has also mooted a proposal to permit pension funds to invest upto 15 per cent of their funds in infrastructure projects as also suggested that refinancing of existing rupee loans through ECB be permitted for such projects based on interest cost advantage. In a representation forwarded to the Finance Ministry, the Assocham president Swati Piramal emphasised that ECB usage should be permitted for utilisation against working capital and long-term financing of debts for infrastructure sector especially steel industry. The debt for various industrial projects in India is currently met by Indian banks. Steel industry projects are typically large and are highly capital intensive and therefore require huge investments. Such projects have economic life of around 30-40 years, said Piramal. Source: Realty Plus Allow re-finance of infrastructure debts through ECBs: Assocham Click On "Full Story" For More..
Piramal pointed out that currently Indian banks are constrained by their own available funds being short term in nature and they usually lend for average period of around four to five years. "This clearly means that project companies face huge debt servicing obligations in initial years of their operation, Piramal said, adding, "This places them in financial hardship, particularly when business faces a normal cyclical downturn." It is therefore necessary to permit corporate to access ECBs to re-finance the loans from Indian banks so that the debt maturity profile matches with economic life and the company has a sustainable debt level, said Piramal.
In addition, the Chamber has also suggested that commercial banks be permitted to raise long-term bonds from NRI's, for a period of 10 years, to garner funds for infrastructure sector. Besides, it has also mooted a proposal to permit pension funds to invest upto 15 per cent of their funds in infrastructure projects. The industry body has also suggested that refinancing of existing rupee loans through ECB be permitted for such projects based on interest cost advantage. The Assocham has also emphasised that earlier policy of allowing Indian banks to guarantee ECBs should be restored to enable corporates to access cheaper source of funds to effectively compete in the export markets.
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