External borrowing norms eased for MSMEs: Govt

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SME Times News Bureau | 23 Aug, 2012
For the first time micro, small and medium enterprises (MSMEs) have been allowed to access cheaper overseas credit through Small Industries Development Bank of India (SIDBI), a finance ministry statement said on Wednesday.

The finance ministry on Wednesday decided to further liberalise the norms for raising external commercial borrowing (ECBs) by MSMEs, particularly those in the realty sector.

The High Level Committee on External Commercial Borrowings, which met on Wednesday, chose to keep the overall window for ECBs at the current USD 40 billion, it allowed cash-starved sectors of urban housing and MSME to access such funds and also eased the refinancing norms for infrastructure and manufacturing firms.

The committee permitted SIDBI to mobilise cost-effective funds abroad for on-lending to MSMEs with some riders. SIDBI has been made as "an eligible borrower" for accessing ECB route for on-lending to MSMEs.

While the finance ministry will finalise the detailed norms in consultation with the Reserve Bank of India, an official said that the move will help the MSME sector, given the weak global markets.

The committee also decided to place refinancing of buyer's credit for import of capital goods used in core sector project sunder the automatic approval route while increasing the maturity of such loans to maximum five years.

The government has also allowed eligible non-resident entities to credit-enhance the issue of rupee bonds by all companies. The minimum maturity period of such bonds has been reduced to three years from seven years at present. FIIs have been permitted to invest in these bonds up to USD 5 billion within the overall limit of USD 45 billion in the case of corporate bonds.

This would mean that such firms would no longer be required to take clearance from the Reserve Bank and would also have a longer tenure to repay the debt raised offshore, reports media.