Mumbai: The Reserve Bank of India (RBI) has issued the details on its announcement of last Thursday allowing airline companies to tap external commercial borrowing (ECB) for working capital needs.
The overall ECB limit for the sector is $1 billion and for an individual company, $300 million, RBI said on Tuesday.
Finance Minister Pranab Mukherjee’s budget speech had said Indian carriers would be allowed to borrow for working capital from foreign banks. Airlines have welcomed the move, as it could make available loans at cheaper interest rates. However, analysts are cautious whether airlines would be able to, considering their troubled financial health.
RBI has mandated that a company should raise this foreign debt within 12 months. The minimum average maturity can be three years. “ECB will be allowed to the airline companies based on cash flow, foreign exchange earnings and its capability to service the debt,” it said.
25/04/12 Business Standard
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