Companies will now be able to raise only up to $ 20 million abroad for Indian rupee expenditure and that too with prior approval of the Reserve Bank of India (RBI), an official statement said here on Tuesday.

Borrowers raising more than $ 20 million should park the money overseas for use as foreign currency expenditure for permissible end-users, the statement said.

The move is aimed at restricting inflow of funds and checking the upward pressure on rupee, which has put Indian exporters at a disadvantage. Exports have come down from 23 percent in April this year to 14 percent in June.

The Indian currency has appreciated by around nine percent against US dollar in the last four months.

Of late, Indian companies have been raising funds through external commercial borrowings at cheaper rates to finance expansion and modernisation plans in view of hardening domestic interest rates.

The huge inflow of external commercial borrowings, foreign institutional investment in stock market and foreign direct investment is adding to liquidity, which in turn has pushed up the inflation level and the value of rupee.

Fund flows through external commercial borrowing doubled to $ 21.9 billion in fiscal year 2006-07 from around $ 10 billion in 2005-06.

The government said the policy on external commercial borrowing is constantly reviewed in consultation with the RBI to keep in tune with the evolving macro-economic situation, changing market conditions, sectoral requirements, external sector and lessons of experience.

Analysts say the RBI has twin challenges to meet. If the central bank intervenes in the foreign exchange market and buys dollar, the money supply will go up adding to inflation. On the other hand, if it does not intervene, rupee will appreciate, further affecting the competitiveness in exports.