Remove all fetters on ECBs, suggests Sahoo panel
Indian banks should not be allowed to extend ECBs to domestic corporate houses out of their overseas subsidiaries or branches, a government-appointed panel has said.
A recommendation to this effect was made by the Sahoo Committee in its report on foreign currency borrowings made public on Friday.
This norm should also apply for guarantees, which means that Indian banks based abroad should not be allowed to extend guarantees for ECBs, the panel has suggested.
The Sahoo panel has said that external commercial borrowing (ECB) may be raised from any lender who is from a financial action task force (FATF) compliant jurisdiction and who has no Indian interests. This would essentially shut the window for Indian banks to extend ECBs to domestic corporates out of the overseas branches/ subsidiaries of these banks.
This is a good suggestion as some domestic corporate houses tended to use the ECBs raised from the overseas branches of Indian banks to “evergreen” their existing rupee loans from the same banks, sources in the banking industry said.