The Telegraph
Since 1st March, 1999
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$ 1.7 bn ECBs okayed in first quarter

Mumbai, Aug. 2: In an indication of India Inc taking the benefit of cheaper credit abroad, the Reserve Bank of India (RBI) has approved external commercial borrowing (ECBs) proposals aggregating $ 1.7 billion during the first quarter ended June 30. according to its executive director Usha Thorat.

This was revealed by RBI executive director Usha Thorat while addressing India Debt Investors conference organised by Fitch Ratings and Citigroup here today. “The companies are taking benefit of cheaper credit outside India and currency exchange value, and proposals of $ 1.7 billion have been cleared in first quarter of current fiscal,” she said.

The RBI executive director further said that the central bank has enough instruments to manage money market liquidity. “There have been doubts expressed as to whether RBI has the instruments available to manage liquidity when inflows are higher. The RBI has amply proved that it has enough armoury with itself to manage liquidity,” she averred.

Recently, bond yields have touched record lows following ample liquidity in the system. Analysts state that one of the reason leading to this situation was the central bank buying of dollars in the forex market.

Thorat said the RBI would better manage liquidity if it was allowed to issue its own bonds. “Legislative changes would certainly enable the RBI to issue its own bills and bonds which is currently prohibited under the RBI Act,” she said.

The RBI currently uses various methods that include the liquidity adjustment facility to control liquidity in the system.

She said the NRE deposit rate has been capped in view of the surge in inflows through this route and the RBI measure is likely to slowdown inflows.

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