New ECB Guidelinesnews
The Government had issue
04 April 2007

The Government had issued the last consolidated External Commercial Borrowings (ECBs) Guidelines in July 1999. Subsequent amendments to these guidelines were made - the last being the Press Release dated 12-11-2003. In the background of developments in recent months, it has become necessary to carry out the following revisions in the existing ECB policy until further review.

The following liberalisation in the ECB policy are made:

[I] Removal of end-use restriction – ECBs would be allowed for corporate investments in industrial sector especially infrastructure sector. Money has to be parked abroad unless actually required. Usual restriction on ECB for investment in capital market or in the real estate will, however, continue.

[II] Eligibility - All corporates except banks, NBFCs and financial institutions shall be eligible ECB borrowers. However, banks and financial institutions having participated in the Textile or Steel sector restructuring package of the Government/RBI will be permitted to the extent of their investment in the package.

[III] Interest rate spreads – All ECBs shall be subject to the following revised maximum spreads over six month LIBOR, for the respective currency in which the loan is being raised or the applicable benchmark(s), as the case may be:

Average maturity of 3-5 years – 200 basis points

More than 5 years of average maturity – 350 basis points

[IV] Guarantee- Banks ,FIs, NBFCs will not be able to provide guarantee/letter of comfort etc.

[V] Procedure – All ECBs satisfying the above criteria will be under the auto route up to USD 20 million for ECBs between 3-5 years of average maturity and up to USD 500 million for ECBs having average maturity of more than 5 years. RBI will be prescribing the reporting mechanism for the same.

2. FCCBs- In case of FCCBs similar liberalization, as being made for ECBs, is made with regard to spreads, end use restrictions, procedures etc.

3. All cases, which fall outside the purview of the auto- route in the new liberalised ECB policy, will be decided by an Empowered Committee of the RBI.

4. The above amendments to the ECB guidelines will come into force from the date of issue of notification of regulations/directions.

also see : ECB norms relaxed

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New ECB Guidelines