In a boost to oil companies, the Reserve Bank of India has eased the overseas borrowing norms by up to $10 billion.
The RBI said that the state-owned oil companies can raise external commercial borrowings (ECBs) for working capital with minimum average maturity of 3-5 years and they don't have to mandatorily hedge all ECBs. The overall ceiling for such ECBs shall be $10 billion.
AK Sharma, director of finance at Indian Oil Corp, spoke to CNBC-TV18 about the impact of the above developments.
"Since the working capital requirement for OMCs is huge, this decision will broaden the basket for working capital requirement. Moreover, since the tenure of repayment is 3-5 years it is positive because it will be fairly spread," said Sharma.
With regards to hedging, he said, "Earlier it was mandatory to hedge all kind of borrowings but now there is relaxation given by the RBI and so the OMCs can decide if they want to hedge immediately or not. If we hedge it immediately it will be costlier than the domestic loans and so this waiver on hedging is important to us as it makes borrowing cost lower."
"Currently, for the company the foreign currency borrowing is around $6-7 billion. So there will be rearrangement of internal and external borrowings over a period of time," said Sharma.
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