IDBI may have to rework its $500 million external commercial borrowing proposal after the government tightened the norms last week.

The country's leading financial institution, however, plans to tap the domestic market by November end with its tax-saving bonds targeted at raising upto Rs 3,000 crore (Rs 30 billion).

"The first tranche of bonds are slated to hit the market during November end subject to regulatory approval," official sources told PTI in New Delhi on Monday.

IDBI is in the process of getting clearances from Securities and Exchange Board of India.

"As soon as the clearance comes, the bonds would be launched," the officials said.

IDBI have obtained umbrella clearance from the finance ministry for raising Rs 1,500 crore (Rs 15 billion) in tax-savings bonds with a green-shoe option to retain another Rs 1,500 crore.

IDBI had also applied for raising $500 million through the external commercial borrowings route this fiscal for restructuring debts of steel and textile companies.

Although IDBI planned to raise the ECBs at Libor plus 1.75 per cent, the new norms capped maximum spread at Libor plus 1.5 per cent from the present Libor plus 3.0 per cent.

In case of infrastructure projects, the government has capped the maximum spread on ECBs at Libor plus 2.5 per cent from the present Libor plus 4.0 per cent while it would be  Libor plus 3.0 per cent for long term projects.

Although the government is discouraging ECBs above $100 million, the finance ministry had earlier cleared ICICI Bank's $300 million ECB as the bank would use it for ailing steel companies.

IDBI hopes to get the premission on the same ground as the ECB proceeds would be used for restructuring textiles and steel companies.

The bonds and ECBs are crucial for IDBI, as it would continue with developmental financing even after Parliament approves the bill to repeal IDBI Act.

Restructuring at the IDBI has started but the FI is yet to be allowed to raise cheaper deposits.

This would be possible once the repeal bill is passed and the FI is registered as a banking company.

The government has plans to bridge the interest rate differential in the first five years of its transformation, as IDBI's cost of funds is more than its cost of lending.