Govt to extend ECB facility for integrated townships

Government has decided to extend the External Commercial Borrowings (ECB) facility for integrated townships, reports CNBC-TV18's Siddharth Zarabi. There had been some reports in the last few days about the overall approach that the government is adopting with regard to inflows and there was recently, around 10 days back, a meeting of the high level committee of the ECBs. Several decisions have been taken. One of them is about integrated townships and the extension being granted by one-year as a permissible end use under the ECB norms for integrated township.

The Reserve Bank of India (RBI) had not agreed initially because it took the view that real estate prices still remain high and the much needed correction has not taken place and also the fact that banks were making credit available to the sector. But the government ultimately prevailed and decided that since this will improve infrastructure facilities. Remember, several projects are on going infact including in Delhi for instance related to the Commonwealth Games. So this facility has been extended by a year.

The other important bit is that the present policy dispensation with regards to the all in costs under the approval route will be allowed to lapse from January 1, 2010. There was a change in this regard because the government was concerned about borrowing some time back and now the high level committee has taken the considered view that since there is an overall improvement in credit market conditions, the spreads have narrowed and most ECBs. In fact there was a bank and airport developer, which had borrowed well within the limits under the automatic route. Therefore the approval route permission will be allowed to elapse from January 2010.

There have been several other decisions. One is also regarding the auction of ECB. Again the government had consulted with the RBI some time back about the advantages of introducing auction mechanism for ECB, however the RBI was not convinced and this issue will also discuss at the high level committee on ECB and ultimately it was decided because there are technical and operational issues, a new committee chaired by the joint secretary and Finance Ministry with representatives from the RBI and others will prepare recommendations and these will be discussed at the meeting.