Liberalising overseas borrowing norms, the government on Wednesday allowed housing financing companies to raise funds through external commercial borrowings (ECBs) route to finance low-cost housing projects.
The High Level Committee on External Commercial Borrowings which met on Wednesday, also permitted FIIs to invest up to $5 billion in rupee bonds within the overall corporate bond limit of $45 billion.
Also, the Small Industries Development Bank of India (SIDBI) has been made as "an eligible borrower" for accessing ECB route for on-lending to the Micro, Small and Medium Enterprises (MSME).
"It has been decided that entities like NHB and HFCs will be included as eligible borrowers for financing such low cost housing projects," a Finance Ministry statement said.
The decision to allow NHB (National Housing Bank and HFCs (Housing Finance Companies) raise ECBs comes in the backdrop of shortage of housing for low income groups in major cities and towns.
ECBs are considered attractive as cost of raising the loan is lower than that of domestic borrowings. Besides, they provide an additional avenue to access large amounts of funds from global financial markets.
In another major decision, the committee also enhanced the limit for ECB for infrastructure and manufacturing sector companies to refinance their existing rupee loans.
The Finance Ministry further said refinancing of buyer's credit for import of capital goods in the infrastructure sector will be placed under automatic route.
It has also been decided to increase the maturity of such buyer's credit to maximum five years, it added.
It further said foreign entities will be allowed to credit enhance the issue of rupee bonds by all companies. The minimum maturity period of such bonds has also been reduced from seven years to three years.
Finance Minister P Chidambaram on August 6 had unveiled a roadmap to boost investment and economy by fine-tuning policies to put in place a stable and non-adversarial tax regime.