The government has announced a second fiscal stimulus package amounting to Rs 20,000 crore.As part of these measures, the government has announced the liberalization of external commercial borrowings policy and removed all-in-cost ceiling on such borrowing. Realty companies are now eligible to use ECBs to develop integrated townships.
The government has also given a boost to the corporate bond market by hiking the FII investment limit from USD 6 billion to USD 15 billion.
The government will also form a special-purpose vehicle to aid liquidity against investment grade papers for non-banking finance companies. The SPV can provide liquidity up to Rs 25,000 crore. Public sector banks will work out larger credit line for commercial vehicle purchases by NBFCs.
The credit target of public sector banks has been hiked to meet the needs of the economy. The government will also monitor provision of sectoral credit by public sector banks on a fortnightly basis.
Mont
ek Singh Ahluwalia, Deputy Chairman, Planning Commission, Government of India is hoping that the stimulus package will make the New Year happier than it would have been without it. Simultaneously the Reserve Bank of India or RBI has reduced the cash reserve ratio (CRR) by 50 bps and also reduced the two policy rates, repo rates and the reverse repo rates by 100 bps."In coordination with the RBI, the existing restrictions on ECBs have been liberalized making it easier for companies that want to borrow to be able to get ECBs from abroad if they want them," he added.
Commenting on NBFCs Ahluwalia said: "We have also taken a set of measures to channel credit towards non-banking financial companies (NBFCs) - this sector of the economy was not directly affected by the additional liquidity provided, but now the government is setting up or is designating an special purpose vehicle (SPV), which will be used to channel financial support to the NBFCs in a total amount which could be up to Rs 5,000 crore to make sure that the liquidity needs of the NBFCs in the next six months or so do not pose any problems."
He said the government had earlier announced a new window for the India Infrastructure Finance Company Ltd (IIFCL) to provide refinance to banks, which lend in support of infrastructure projects.
According to Montek, the expansion of infrastructure investment in the Public Private Partnership (PPP) area is a very important part of the effort to mount a countercyclical thrust at a point when there is a bit of a global slowdown. (Source : CNBC TV18)
Rupesh Yatesh Dalal
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