RBI allows companies to borrow in rupees offshore from overseas lenders

The Reserve Bank of India (RBI) on Thursday relaxed rules for Indian companies to raise money in rupees from overseas lenders.

The overseas lenders will have to enter into currency swap transactions with their overseas banks who in turn will provide rupees by tapping a bank in India for extending funds in rupees to the corporate.

Earlier, an Indian corporate offshore had no access to borrow in rupees from overseas market and had to first take a dollar loan and then convert the same into rupees which included undertaking the foreign currency risk.

However, under the relaxed rules, the forex risk will shift from Indian corporate to the lender of that fund offshore, a senior foreign banker said.

The back to back swap arrangement between the offshore lender, the overseas bank and the bank in India will be subject to underlying external commercial borrowing rules, the RBI said.

(Reporting by Suvashree Dey Choudhury and Devidutta Tripathy; Editing by Anand Basu)