The government does not see payment-related problems for equity investors in the near term despite global market turbulence, and may consider easing overseas borrowing rules, a finance ministry official said.

On Tuesday, the Reserve Bank of India (RBI) announced steps to ease “transient pressures” in the local market as sentiment was hit after the collapse of Lehman Brothers. The shares fell 1.9 per cent on Wednesday, taking losses to more than a tenth over seven consecutive sessions, as sentiment weakened for the financial sector globally. “The turbulence may have some impact on the capital market but payment obligations are being met. The finance ministry does not see any payment-related problem for now,” the finance ministry official, who did not wish to be named, said. The official said India was considering relaxation in the overseas borrowing rules so that Indian companies could raise funds at a cheaper rate from abroad. “We believe there is a strong case for easing external commercial borrowing rules. The RBI and the finance ministry will decide on that sometime later,” he said.

In May, India eased rules and allowed manufacturers to bring in to the country up to $50 million of the $500 million that can be raised by a company in a year from overseas markets. The rest must be invested in units overseas. The limit was raised to $100 million for infrastructure companies. Indian firms currently borrow funds overseas at 200 basis points over Libor for a three-to-five year loan, and the spread is 350 basis points for loans above five years.

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