Housing financing companies will now be able to raise funds via external commercial borrowings (ECBs) route to finance low-cost housing projects.
Making it easier for infrastructure companies to raise funds via ECB route, the finance ministry said, "It has been decided that entities like NHB and HFCs will be included as eligible borrowers for financing such low cost housing projects."
The finance ministry allowed NHB (National Housing Bank) and HFCs (Housing Finance Companies) to raise funds through ECBs in the backdrop of deficiency of housing for low income groups in big cities of the country. A few days back, Finance Minister P Chidambaram had directed Indian Bankers Association (IBA) to form a committee to make recommendations to the government on how to tackle the slowdown in the housing demand.
The FIIs have also been given green signal to make investment of up to $5 billion in rupee bonds in the overall corporate bond limit of $45 billion.
In addition, SIDBI (the Small Industries Development Bank of India) has been given the permission to borrow money through ECB route for on-lending to the Micro, Small & Medium Enterprises.
ECBs are considered more attractive because cost of raising funds/loans through this route is lower than that of domestic borrowings.