The union government has said that it expects the central bank, the Reserve Bank of India (RBI) to notify a proposal that would allow Indian aviation firms to borrow up to US $ 1 billion as external loans for a period of one year within seven days.

The Finance Ministry said in a statement that the central bank is expected to issue a notification for approving the proposal that was part of the budget announcement, within the next seven days.

Finance Minister Pranab Mukherjee had said in his budget speech that he recommends allowing external commercial borrowing (ECB) for working capital requirement for the airline industry. He proposed allowing borrowings for the period of one year with a cap of US $ 1 billion.

Meanwhile, the ministries of Finance and Civil Aviation are already backing the proposal to amend the FDI guidelines for the aviation sector and there are some ministries that are yet to announce give their approval. The government is considering allowing foreign airlines to buy stakes in Indian carriers.

The proposal to allow foreign aviation companies to start investing in India's airlines will come as a relief to the cash-strapped firms in the country like Kingfisher and others. It recommends allowing foreign airlines to buy up to 49 per cent stake in Indian carriers.