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Cos can offer equity against all ECBs

Our Bureau

New Delhi , Dec. 3

THE Government has permitted Indian companies to issue equity shares against all types of external commercial borrowings (ECBs).

Earlier in July, the Government had permitted partial conversion of ECBs for those loans that have already become due for repayment.

Today's announcement permits Indian companies to "issue equity shares against all ECBs (excluding those deemed as ECBs) received in convertible foreign currency, subject to meeting all tax liabilities and procedures."

The types of ECBs that are eligible for such conversion include commercial bank loans, buyer's credit, supplier's credit, securitised instruments, credit from official export credit agencies, commercial borrowings from the private sector window of multilateral financial institutions, as well as investment by foreign institutional investors in dedicated debt funds.

It may be mentioned that the policy change has come at a time when a majority of the big Indian companies have accessed substantial amounts of ECBs during the last two years in order to swap their high cost domestic debts with cheaper dollar loans and the rupee is increasingly becoming stronger compared to the dollar.

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