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Lending curbs on SEZs to be removed
| September 17, 2008 |  (Be the first to rate this story!) Loading ... |
The government is planning to remove lending curbs on special economic zones and give SEZs (Special Economic Zone) the coveted ‘infrastructure’ status, which would help them raise loans at cheaper rates from domestic banks. This would help counter the global financial crises. Since 2006, the Reserve Bank of India (RBI) has been treating lending to SEZs at par with loans given to the commercial real estate sector, which carries much higher risk weightage than the infrastructure sector, making it difficult for SEZ developers to tap the local debt market. The commerce ministry, which has been contesting the RBI view, now plans to take up the matter with the central bank, especially when tremors in the global economy may hit foreign direct investment into India.
Commerce and industry minister Kamal Nath said on Tuesday that he would discuss the issue of RBI’s classification of lending to SEZs as real estate lending with an empowered group of ministers on SEZs. “With liquidity crunch, this (curb) is a problem. The matter is before the eGoM, which will take it up with the RBI,” he said, addressing a meeting of the Export Promotion Council for EOUs and SEZs (EPCES). The empowered group of ministers (eGoM) on SEZs is likely to be held early next month.
The ministry would also push for allowing SEZ developers to raise external commercial borrowings (ECBs) only for pure infrastructure development activities, like construction of roads, ports, airports, power plants and water supply amenities. The move would give a substantial push to development of SEZs by enabling developers to raise cheaper funds. Interest rates on ECBs are almost 2.5% lower than on domestic debt. Incidentally, the high level committee on ECBs, comprising of finance secretary, RBI deputy governor and other senior officials, is expected to meet by the month end to review the policy. The government has in May raised the amount of overseas funds infrastructure companies can bring to India to $100 million from $20 million. Currently, SEZ developers are barred from raising ECBs – as SEZs are treated as commercial real estate projects. However, the units based in these zones are permitted to raise such loans.
News Published Under: Special Economic Zones |
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