RBI cautions firms on raising money abroad

Noting some companies are routing funds raised abroad to India by flouting the norms in this regard, RBI has asked banks not to give guarantees to companies for such borrowing and non compliance will lead to penal action. Some companies are accessing the markets abroad for debt funds through foreign arms - holding company, associate, subsidiary or group companies. This money is routed to the Indian company which accounts for the sole or major operations of the group, RBI said in a communication to banks. Such funds are raised at rates exceeding the ceiling applicable under the foreign exchange management regulations. These companies use different methods and structures for channeling such funds for Indian operations, including investment in rupee bonds floated by Indian company.