New Delhi, Nov. 5: The finance ministry plans to allow NBFCs funding infrastructure projects to borrow up to $500 million through the automatic route. This will put them on a par with infrastructure firms.

Non-banking finance companies (NBFCs) had long been demanding this borrowing window as they could access cheaper funds from multilateral agencies such as the ADB and the IFC not only for importing infrastructure equipment but also for rupee loans to infrastructure projects.

The proposed relief for NBFCs is part of the government’s broader plan to tweak external commercial borrowing rules to step up the inflow of hard currencies and stabilise the weakening rupee.

Finance ministry officials said they supported banks’ move to sell dollars to check the rupee fall and would back any other steps to ease liquidity conditions.

The government and the Reserve Bank of India traditionally intervenes in the money market by getting state-run banks such as the State Bank of India to sell or buy dollars.

On the other hand, interest rates in the country are still ruling at a seven-year high, prompting many blue chip companies to look for foreign funds.

The market for corporate bonds, too, has turned weak.

Till now, the Reserve Bank of India had resisted all pressures to further open up the ECB market as it wanted to keep a lid on inflation, which was being fed by the huge inflow of dollars over the last few years.

But keeping in mind the depreciation of the rupee over the past year, the finance ministry feels it will be safer to nudge the rupee to a stable rate of 45-47 to the dollar.

The country’s foreign exchange reserve, which crossed $300 billion earlier, now stands below $270 billion. Analysts expect it to decline further in the months ahead. Though the rupee gained 0.6 per cent to 47.43 today, most traders say the gain is not sustainable and is totally dependant on stock movements, which are volatile. The Indian currency traded at 40 to the dollar a year back.

“FIIs bought stocks today so the rupee gained ... but that does not happen every day now,” said Abhishek Chaudhry, a forex dealer. “We expect the rupee to trade at 49 to the dollar again soon.”

The rupee fall is good news for exporters whose produce becomes far more competitive, but it means India will have to spend more on imported commodities.

The crude oil import bill shot up by 76.7 per cent to $10.96 billion from $6.2 billion in August 2007. With the dollar-rupee rate now far more adverse, India has to spend more to buy its crude supplies.