With RBI's move to modify the ECB (External commercial borrowings) norms, funds through ECB route may become costlier.

According to FICCI, the ECB route is often adopted by Small and Medium Enterprises (SMEs) for raising funds, which are otherwise available at a higher rate from the domestic banks.

It pointed out that the gradual withdrawal of certain ECB norms that were introduced by RBI during financial crisis indicates gradual withdrawal of stimulus package.

To manage excessive liquidity in the system, RBI on Wednesday tightened the ECB guidelines by withdrawing relaxations provided to companies to raise money from overseas market.

The regulator has also decided to discontinue the facility for buyback of foreign currency convertible bonds (FCCBs) by Indian Companies with effect from January 1, 2010.

January 1 onwards the ‘all-inclusive' ceiling for ECB under the approval route will be 300 basis points higher than LIBOR (London Inter Bank Offer Rate) for loans with tenures 3-5 years and 500 points above for loans with maturity over 5 years. The all-inclusive ceiling is the spread which companies can pay to raise funds.