BE/RBI NOTE/03/2019
With a view to help in improving business RBI relaxed the norms on External Commercial Borrowings:
- This means all companies who are eligible to raise Foreign Direct Investment will be able to raise funds through ECB route.
- This results in the expanded list of eligible borrowers in the ECB route
- This comes in to effect immediately.
- The Extant framework for ECB and Rupee denominated bonds thus stands rationalizes after due consultation with Government of India authorities as per the report.
- All ECBs will now have a minimum average maturity period of three years irrespective of the amount of borrowing.
- However, specifically permitted to the borrower for a shorter period will be exempted from this.
- The ceiling for the borrowing has been pegged at USD 750 million per financial year.
- Earlier the minimum average maturity period was five years.
- Any entity who is a resident of a country which is financial action task force compliant will be treated as a recognized lender which means that lending options will be increased and new lenders will be foreseen in the lenders space.
- Thus, the Anti-money laundering and combating of Terrorism finance framework will be strengthened more.
- Funds raised via ECBs has been capped at 6.5% of GDP at current market prices and based on the GDP figures for March 31, 2018, the soft limit works out to USD 160 billion.
