Govt allows RBI to approve ECBs up to $100m

NEW DELHI, JUNE 14: The Government has liberalised the external commercial borrowings (ECBs) guidelines, allowing the Reserve Bank of Indi...

NEW DELHI, JUNE 14: The Government has liberalised the external commercial borrowings (ECBs) guidelines, allowing the Reserve Bank of India (RBI) to approve them up to $100 million. ECB approvals up to $50 million and all refinancing of existing ECBs will, henceforth, be through the automatic route.

Earlier, the RBI was empowered to give ECB clearance under the $5-million scheme and up to $10 million under all other windows. According to an official announcement, corporates and institutions proposing to raise ECBs up to $100 million would have to approach the Exchange Control Department of the RBI in

class="keywordtourl" href="https://indian-express-develop.go-vip.net/section/cities/mumbai/" class="" rel="nofollow, noopener" target="_blank">Mumbai.

As far as the automatic approval route is concerned, the RBI has been asked to develop the software and make the institutional arrangements to operationalise the scheme.

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According to the modified guidelines, all pre-payment approvals will be given by the RBI. At present, these approvals are being given by the ministry of finance/the RBI depending upon on who had given the initial ECB approval. Corporates seeking to pre-pay the ECBs will have to submit the applications to the RBI in Mumbai, along with the requisite loan details.

As per the modified policy, power, telecommunications, railways, roads, ports, industrial parks, and urban infrastructure (water supply, sanitation and sewage projects) will qualify for ECBs up to $200 million under the infrastructure category.

In February last, the ECBs for infrastructure projects to finance equity investment in subsidiaries and joint ventures was liberalised from $50 million to $200 million. The ECB exposure for all infrastructure projects was enhanced to 50 per cent of the project cost as appraised by a recognised financial institution/bank. The Government had decided to even allow exposure beyond 50 per cent of the project cost in the case of power and other infrastructure projects on the merits of each case. The new policy has defined the seven sectors in infrastructure which qualify for the liberalised regime.

According to the modified policy, the average maturity of the ECBs shall be the weighted average of all disbursements, and non-banking finance companies (NBFCs) would also be eligible for ECBs subject to certain conditions. The conditions are: They should be registered with the RBI, should have earned profits for the last three consecutive years, and should have secured an `AA’ rating from a reputed credit-rating agency.

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In case of NBFCs where a credit-enhancement guarantee has been provided by its parent on a `non-recourse and non-repatriable basis’, the condition of three years’ profit track record will be not applicable, and the credit rating of `A’, or equivalent, would be acceptable.

The announcement also said the existing `all-in-cost ceilings’ for normal projects, infrastructure projects, and long-term ECBs will be 300, 400, and 450 basis points over six months Libor for the respective currency in which the loan is being raised, or the applicable benchmark. The ECB guidelines are revised every three months, and the annual ceiling for ECBs in 2000-01 has been pegged at $8.5 billion.