Wednesday, April 13, 2016

External Commercial Borrowings (ECB) – Revised framework

It has been decided to make the following changes in the ECB framework:

i.          Companies in infrastructure sector, Non-Banking Financial Companies, Holding Companies and Core Investment Companies (CICs) will also be eligible to raise ECB under Track I of the framework with minimum average maturity period of 5 years, subject to 100 per cent hedging.
ii.         For the purpose of ECB, “Exploration, Mining and Refinery” sectors will be deemed as infrastructure sector, and can access ECB as applicable.
iii.         Companies in infrastructure sector shall utilize the ECB raised under Track I for the end uses permitted for this Track. NBFCs-IFCs and NBFCs-AFCs will, however, be allowed to raise ECB only for financing infrastructure.
iv.         Holding Companies and CICs shall use ECB only for on-lending to infrastructure Special Purpose Vehicles.
v.          The individual limit of borrowing under the automatic route shall be as applicable to the companies in the infrastructure sector (USD 750 million).
vi.         Companies in infrastructure sector, Holding Companies and CICs will continue to have the facility of raising ECB under Track II.

It is further clarified that:

i.          The designated AD Category-I banks may allow refinancing of ECBs raised under the previous ECB framework, provided
·       the refinancing is at lower all-in-cost,
·       the borrower is eligible to raise ECB and
·       residual maturity is not reduced.
ii.         ECB framework is not applicable to investment in Non-convertible Debentures made by Registered Foreign Portfolio Investors.
iii.         Minimum average maturity of Foreign Currency Convertible Bonds & Foreign Currency Exchangeable Bonds is 5 years. The call and put option, for FCCBs cannot be exercised prior to 5 years.
iv.         Only those NBFCs which are coming under the regulatory purview of the Reserve Bank are permitted to raise ECB. Under Track III, the NBFCs may raise ECBs for on-lending for any activities including infrastructure.
v.          The provisions regarding delegation of powers to designated AD Category-I banks is not be applicable to FCCBs/FCEBs.

All other aspects of the ECB policy shall remain unchanged.
Based on RBI notification dated 30/03/16. For further clarifications, please refer …………….Poppy Sharma