The Reserve Bank of India (RBI) unveiled new draft rules on Friday aimed at simplifying the process for Indian companies to secure funding in foreign currencies. The proposed changes would expand the scope of eligible borrowers and lenders for external commercial borrowings while also relaxing restrictions on their utilization.
Under the draft rules, the RBI has recommended tying the limits on overseas borrowing to a company's financial health, enabling businesses to potentially raise up to $1 billion or 300% of their net worth, whichever is lower. Additionally, external commercial borrowings would be permitted at interest rates determined by the market.
In an effort to gather feedback from stakeholders, the central bank has opened a public consultation period until October 24, after which the final rules will be issued.
These proposed changes are seen as a potential boon for Indian companies looking to access international capital markets. By facilitating easier and more flexible mechanisms for raising funds in foreign currencies, businesses may find it more attractive to explore funding options beyond domestic sources.
The RBI's initiative reflects efforts to streamline regulatory processes and promote a more conducive environment for corporate financing. With the global economic landscape becoming increasingly interconnected, providing Indian businesses with greater access to international funding channels can help drive growth and competitiveness in the long run.
As the consultation period progresses and industry stakeholders weigh in on the proposed rules, the final framework is likely to undergo further refinements that address concerns and optimize the effectiveness of the new regulations.
