The government has relaxed rules for external commercial borrowings, allowing non-banking finance companies to raise overseas loans.

Housing finance companies, with approval from the Reserve Bank of India, would be allowed to issue foreign currency convertible bonds.

The government also raised the repayment limit of external commercial borrowings to $200 million from the current $100 million

The Housing Development Finance Corporation (HDFC) is likely to be the first off the block among housing finance companies to raise an FCCB.

The corporation had already taken shareholder approval in July 2004 to raise $500 million.

HDFC is also likely to raise funds through the ECB route in keeping with its past practice of raising at least 10 per cent of funds from the overseas market.

Eighteen months back, the government had clamped down on housing finance companies from raising funds through the overseas market.

Overseas funding is attractive today considering that the 5-year US swap rate stands reduced to below 5 per cent for the first time in a year. The 5-year swap rate is usually used to price convertible debentures.

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