Mumbai: The Reserve Bank on Wednesday came out with a new policy for overseas borrowings, allowing all eligible entities to raise foreign funding under the automatic route and removing sectoral curbs.
All eligible borrowers can now raise External Commercial Borrowings (ECB) up to $750 million or equivalent per financial year under the automatic route replacing the existing sector wise limits.
The "liberalisation/rationalisation" in the new framework ECB and rupee-denominated bonds has been done to further improve the ease of doing business, the central bank said.
"Tracks I and II under the existing framework are merged as 'Foreign Currency denominated ECB' and Track III and Rupee Denominated Bonds framework are combined as 'Rupee Denominated ECB' to replace the current four-tiered structure. The framework is instrument-neutral," the RBI said.
Track I, II and III denotes amount and maturity of funds raised.
Further, all-in cost ceiling per annum has been pegged at "benchmark rate plus 450 bps spread'.
The minimum average maturity period (MAMP) has been kept at three years for all ECBs, irrespective of the amount of borrowing in lieu of various layers of MAMPs as at present, except the borrowers specifically permitted in the circular to borrow for a shorter period, the RBI norms said.
The list of eligible borrowers has been expanded to include all entities eligible to receive foreign direct investment (FDI).
Additionally, port trusts, units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, registered societies/trusts/ cooperatives and non-government organisations can also borrow under the new framework.
However, lending and borrowing under the ECB framework by Indian banks and their overseas branches/subsidiaries will be subject to prudential guidelines, the RBI said.
"Further, other entities raising ECB are required to follow the guidelines issued, if any, by the concerned sectoral or prudential regulator," the central bank said.
ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities and should conform to parameters such as minimum maturity, permitted and non-permitted end-uses, and maximum all-in-cost ceiling.
The negative list, for which the ECB proceeds cannot be utilised, would include real estate activities, investment in capital market, equity investment, working capital purposes except from foreign equity holder, repayment of Rupee loans except from foreign equity holder.
To keep watching India’s No. 1 English Business News Channel – CNBC-TV18, call your Cable or DTH Operator and ask for the Colors Family Pack (inclusive of 24 channels), available for Rs. 35/- per month, or subscribe to the channel for Rs. 4/- per day.
To keep watching the Leader in Global Market & Business News – CNBC-TV18 Prime HD, call your Cable or DTH Operator and ask for the Colors Family HD Pack (inclusive of 25 channels), available for Rs. 50/- per month, or subscribe to the channel for Rs. 1/- per day.
The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
Updated Date: Jan 17, 2019 07:20:58 IST