The Reserve Bank of India (RBI) on Monday said external commercial borrowings (ECBs) can be used to buy shares in multiple rounds of PSU disinvestment, a move to help the government's aim to raise Rs 40,000 crore from stake sales during 2013-14.
In 2005, ECB proceeds were allowed to be used in the first stage acquisition of shares in the disinvestment process and in the mandatory second stage offer to the public under the government's disinvestment programme of PSU shares.
"It is clarified that ECB is allowed for all subsequent stages of acquisition of shares in the disinvestment process under the government's disinvestment programme of the PSU shares," the apex bank said in a statement.
"In other words, facility of ECB is available for multiple rounds of disinvestment of PSU shares."
Indian companies have borrowed a total of $9.26 billion through the ECB route during the April-July period, according to RBI data.
The government has raised Rs 1,325 crore so far this fiscal year from the sale of its stakes in public sector units against a target of Rs 40,000 crore. In the last fiscal year, FY13, the government had raised Rs 23,920 crore via disinvestment.
Despite volatility in the market, Department of Economic Affairs Secretary Arvind Mayaram recently said the government was confident of meeting the Rs 54,000 crore disinvestment target for 2013-14 by way of selling its stake in both public as well as private sector entities.
The government has set a target of Rs 40,000 crore for its stake sale in PSUs and Rs 14,000 crore from selling its shares in private companies.
The disinvestment proceeds assumes significance as the government aims to keep the fiscal deficit at 4.8 per cent of GDP in 2013-14.
Meanwhile, the RBI has decided to discontinue the facility that allows borrowers to raise ECBs at a higher 'all-in-cost' to refinance or reschedule an existing ECBs. The facility will be discontinued from Tuesday onwards.
As per the extant guidelines, borrowers desirous of refinancing an existing ECB can raise fresh ECB at a higher all-in-cost with prior approval of the apex bank.
'All-in-cost' includes rate of interest, other fees and expenses in foreign currency except commitment fee, pre-payment fee and fees payable in rupee.
In another notification, the RBI said the current 'all-in-cost' ceiling will continue to be applicable till March next year.