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Companies borrowing overseas can park funds in India: RBI

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In a significant move, the Reserve Bank of India (RBI) has allowed companies borrowing overseas to park the funds as term deposits with local banks for a maximum period of six months.

The RBI, in a notification on its website said that the facility was available for entities that have borrowed funds for permitted end uses such as local sourcing of capital goods, on-lending to self-help groups or micro-credit and payment for spectrum allocation, among others.

According to the notification, “No charge in any form should be created on such term deposits i.e. to say that the term deposits should be kept unencumbered during their currency.”

Such deposits should be exclusively in the name of the borrower and they should be available for liquidation as and when required, the regulator said.

RBI stated that the amended policy would come into immediate effect and all other aspects of the external commercial borrowing (ECB) policy would remain unchanged.

In September, the banking regulator had eased certain ECB norms by allowing non-resident lenders to extend rupee loans to borrowers in India, after following certain norms regarding currency swaps with local banks. Prior to that, all eligible borrowers were allowed to raise ECB funds in rupees only from their foreign equity holders.

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