Government of

India

have announced the sale (re-issue) of “7.37 per cent Government Stock, 2014” for a notified amount of Rs.6,000 crore(nominal). Government of

India

have also announced the sale (re-issue) of “10.25 per cent Government Stock, 2021” for a notified amount of Rs.4,000 crore. Both the Government Stocks will be sold through price based auctions using multiple price method. The auctions will be conducted by the Reserve Bank of

India

, Mumbai Office, Fort, Mumbai on June 6, 2005 (Monday).

2. Up to 5% of the notified amount of the sale of both the stocks will be allotted to eligible individuals and institutions as per the Scheme for Non-Competitive Bidding Facility in the auction of Government Securities.

3. Bids in the prescribed form obtainable from the Regional Director, Reserve Bank of

India

, Mumbai Office (Public Debt Office), Fort, Mumbai-400 001 and RBI website www.rbi.org.in should be submitted to that Office on June 6, 2005 . The NDS members should submit competitive as well as non-competitive bid in electronic format using Primary Market Operation (PMO) module of NDS, which has also become operational for Government of India dated securities. All bids should be submitted by 12.30 P.M.

4. The results of the auctions will be announced on June 6, 2005 and payment
by successful bidders will be during banking hours on June 7, 2005 (Tuesday).

Government of

India

Ministry of Finance
Department of Economic Affairs
New Delhi

Dated the June 2, 2005

The Government last amended the policy on External Commercial Borrowings (ECB) in January 2004. The policy is regularly reviewed in consultation with the Reserve Bank of India (RBI) keeping in view the current macroeconomic situation, challenges faced in external sector management and the experience gained so far in administering ECB policy. In the background of developments in recent months, it has been decided to further revise the policy as explained below.

2. ECB can be accessed under two routes, namely, (i) Automatic Route and (ii) Approval Route. ECB for investment in the real sector - industrial sector, especially infrastructure sector in India – is under the Automatic Route , i.e. will not require RBI/Government approval. The maximum amount of ECB which can be raised by an eligible borrower under the Automatic Route is USD 500 million during a financial year. The following is permissible under the Automatic route:

a) ECB up to USD 20 million or equivalent with minimum average maturity of 3 years

b) ECB above USD 20 million and up to USD 500 million or equivalent with minimum average maturity of 5 years

3. All cases, which fall outside the purview of the Automatic Route , will be decided by an Empowered Committee of RBI.

4. Under the extant policy, corporates registered under the Companies Act, 1956, except financial intermediaries such as banks, financial institutions (FIs), housing finance companies and Non-Banking Finance Companies (NBFCs), are eligible. Subsequently, NGOs engaged in micro-finance activities have been permitted to raise ECB up to USD 5 million during a financial year for permitted end-use, under the automatic route. Detailed guidelines have been issued by RBI. It has now been decided to further expand the eligibility/end-use as follows:

a) ECB by NBFCs will be permitted under the Approval Route from multilateral financial institutions, reputed regional financial institutions, official export agencies and international banks towards import of infrastructure equipment for leasing to infrastructure projects with a minimum average maturity of 5 years.

b) Foreign Currency Convertible Bonds (FCCBs) by Housing Finance Companies with strong financials satisfying criteria to be notified by RBI, will be permitted under the Approval Route .

5. Individuals, Trusts and non-profit making organizations, except NGOs as mentioned in paragraph 4 above, are not eligible to raise ECB.

6. Financial institutions dealing exclusively with infrastructure or export finance such as IDFC, IL&FS, Power Finance Corporation, Power Trading Corporation, IRCON and EXIM Bank are considered on a case-by-case basis i.e. through the approval route.

7. Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government are permitted to the extent of their investment in the package and assessment by RBI based on prudential norms. Any ECB availed for this purpose so far is deducted from their entitlement.

8. Borrowers can raise ECB from internationally recognised sources such as (i) international banks, international capital markets, multilateral financial institutions (such as IFC, ADB, CDC etc.) (ii) export credit agencies and (iii) suppliers of equipment, foreign collaborators and foreign equity holders.

9. All ECBs are subject to the following maximum spreads over six month LIBOR, for the respective currency of borrowing or the applicable benchmark(s) as the case may be:

* All-in-cost ceilings includes rate of interest, other fees and expenses in foreign currency except commitment fee, pre-payment fee and fees payable in Indian rupees. Moreover, the payment of withholding tax in Indian rupees is excluded for calculating the all-in-cost.

a) ECB can be raised only for investment (such as import of capital goods, new projects, modernization/expansion of existing production units) in real sector - industrial sector including small and medium enterprises (SME) and infrastructure sector - in

India

. Infrastructure sector is defined as (i) power, (ii) telecommunication, (iii) railways, (iv) roads including bridges, (v) ports, (vi) industrial parks and (vii) urban infrastructure (water supply, sanitation and sewage projects);

b) ECB proceeds can be utilised for overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad;

c) Utilisation of ECB proceeds is permitted in the first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Government’s disinvestment programme of PSU shares;

d) Utilisation of ECB proceeds is not permitted for investment in capital markets by corporates or for on-lending, except for cases mentioned in paragraphs 4, 6 and 7 above;

e) Utilisation of ECB proceeds is not permitted in real estate. The term ‘real estate’ excludes development of townships, housing, built-up infrastructure and construction-development projects as defined by Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, SIA (FC Division), Press Note 2 (2005 Series) dated 3^rd March 2005;

f) End-uses of ECB for working capital, general corporate purpose and repayment of existing Rupee loans are not permitted.

Guarantees

11. Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by banks, financial institutions and NBFCs relating to ECB is not normally permitted. Applications for providing guarantee/standby letter of credit or letter of comfort by banks, financial institutions relating to ECB in the case of SME will be considered on merit subject to prudential norms.

13. Under the earlier guidelines, prepayment of ECB up to USD 100 million was permitted without prior approval of RBI, subject to compliance with the stipulated minimum average maturity period as applicable for the loan. It has now been decided to revise this upward to USD 200 million, subject to minimum average maturity of 5 years. Pre-payment of ECB for amounts exceeding USD 200 million or prepayment of ECBs with minimum average maturity of 3-5 years would be on the Approval Route .

14. Refinancing of existing ECB by raising fresh ECBs at lower cost is permitted subject to the condition that the outstanding maturity of the original loan is maintained.

15. The policy for ECB is also applicable to FCCBs in all respects, except in the case of Housing Finance Companies for which criteria will be notified by RBI.

16. The amendments to the ECB guidelines will come into force from the date of notification of regulations/directions by RBI under the Foreign Exchange Management Act, 1999.

The Press Information Bureau is requested to give wide publicity to this Press Release.

Government of

India

have announced the sale (re-issue) of “7.49 per cent Government Stock, 2017” for a notified amount of Rs.5,000 crore(nominal) through price based auction using multiple price method. The auction will be conducted by the Reserve Bank of

India

, Mumbai Office, Fort, Mumbai on June 23, 2005 (Thursday).

2. Up to 5% of the notified amount of the sale of the stock will be allotted to eligible individuals and institutions as per the Scheme for Non-Competitive Bidding Facility in the auction of Government Securities.

3. Bids in the prescribed form obtainable from the Regional Director, Reserve Bank of

India

, Mumbai Office (Public Debt Office), Fort, Mumbai-400 001 and RBI website www.rbi.org.in should be submitted to that Office on June 23, 2005 . The NDS members should submit competitive as well as non-competitive bid in electronic format using Primary Market Operation (PMO) module of NDS. All bids should be submitted by 12.30 P.M.

4. The result of the auction will be announced on June 23, 2005 and payment by successful bidders will be during banking hours on June 24, 2005 (Friday).

1. The Department of Economic Affairs, Ministry of Finance has been bringing out the Status Report on India ’s External Debt since 1993. The Eleventh Status Report released today gives a detailed analysis of the developments in India ’s external debt during the last year and covers data from March, 1991 to December, 2004. The Report also compares India ’s external debt situation with other countries.

2. India ’s external debt was US$120.9 billion as at the end of December, 2004 against US$112.8 billion at end-December 2003. During this period, the external debt stock in US dollar terms rose by US$ 8.1 billion, of which US$3.1 billion or 38 per cent was contributed by valuation effects arising from depreciation of the US dollar. Significantly, between December 2002 and December 2004, India ’s external debt rose by US$15.5 billion, of which US$8.7 billion or 56 per cent was on account of weakening of the US dollar. During the same period, the sovereign debt rose by US$879 million. If the US dollar had not depreciated, sovereign debt would have actually declined by as much as US$3.9 billion during this period.

3. External debt indicators continued to show improvement over the years though the magnitude of debt has increased. For instance, the external debt-to-GDP ratio has gradually declined over the years to 17.8 per cent in 2003-04 and debt service payments as a proportion of gross current receipts (debt-service ratio) dropped to 16.2 percent in 2003-2004 and further to 6.1 percent during April-December,2004. Similarly, ratios of short-term debt to total debt and short-term debt to forex assets too have improved over the years. India ’s ability to service external debt has substantially enhanced consequent on the improvement in the ratios of total debt service payments and interest payments to current receipts. The debt accumulation was moderate and debt sustainability indicators have improved progressively in the recent past mirroring essentially the sustained efforts of the Government to keep external debt within manageable limit.

4 In terms of international comparison, India ’s external debt indicators such as short-term debt to total debt and short-term debt to forex reserve ratio are the lowest among the top ten debtor countries. Proportion of concessional loans in total debt is the highest for India , while debt to Gross National Income ratio is the second lowest after China in the year 2003. World Bank upgraded India from moderately indebted to less indebted country in 1999. Among the top ten debtor countries of the world, India improved its rank from third debtor after Brazil and Mexico in 1991 to eighth in 2003.

Mr. B.S.Chauhan,
Director
Public Information Officer,
Ministry of Finance,
North Block

Auction for sale (Re-issue) of 7.37 percent Government Stock, 2014 and auction for sale(Re-issue) of 10.25 per cent Government Stock, 2021

Guarantees