Investment bankers and financial analysts said the large-scale clampdown on the ECB route by the finance ministry and the Reserve Bank of India did hurt the corporates by blocking their access to cheap funds.

When contacted, Mohandas Pai, chief financial officer, Infosys Technologies Ltd, said the RBI should ensure that rupee credit was available to corporates at a reasonable rate.

• ECBs face stiff end-use norms

"The central bank should create conditions such that Corporate India is not at a disadvantage," he said.

According to him, the apex bank could drop the repo rate, which was creating an artificial floor.

"The repo rate can be reduced to 3.5 per cent from 4.5 per cent now so that bank lending to corporates is possible at 5-5.5 per cent," Pai said.

The move should, however, be seen as a special measure, in the background that the rupee was appreciating on technical and not on fundamental grounds.

"In a situation where the absorptive capacity of the economy is limited, the move to minimise accretion to forex reserves which led to increased liquidity, is welcome," Pai said.

Ravindra Kumar, executive vice president, corporate investment and banking, Credit Lyonnaise said at a time when the government was relaxing the investment curbs from overseas, the new guidelines will shrink the market.

Kumar said by asking corporates to park their unspent funds overseas, the RBI was attempting to stagger the inflow of forex into the country.

"The silver lining in the new policy is that it is a temporary measure," he said.

Vivek Mehra, executive director, PricewaterhouseCoopers, said there were enough safeguards in the existing ECB policy like restrictions on maturity which could have ensured that hot money did not flow into the country.

He said ECB was a capital account transaction and when the country was moving towards capital account convertibility, this move was a step backward.

He said it was unduly restrictive and had put the brake on the market forces, which should have been allowed to determine the allocation of credit to industry at competitive rates.

Arun Kaul, general manager, treasury, Punjab National Bank, said it was clear that the Reserve Bank of India was trying to control the dollar inflow.

"There is a feeling in the market that liquidity may not grow the way it has been following the clamp down on ECB window," he said.

This was reflected in the gilts market today where the yield on 10-year government securities moved up from 5.06 per cent to 5.09 per cent.

The reactions

• Corporates feel the Reserve Bank of India should ensure that rupee credit is available to corporates at a reasonable rate.
• They believe the new guidelines will shrink the market, especially at a time when the government is relaxing the investment curbs from overseas.
• Moreover, by asking them to park their unspent funds overseas, the RBI is attempting to stagger the inflow of foreign exchange into the country.
• They feel there were enough safeguards in the existing ECB policy like restrictions on maturity, which could have ensured that hot money did not flow into the country.