RBI re-imposes caps FCCBs, ECBs amid economic upturn

In view of the prevailing macroeconomic conditions and developments in international financial markets, the Reserve Bank of India (RBI) has decided to reintroduce the ceiling on interest rates that Indian companies pay for external commercial borrowing (ECBs).

As per the extant policy, the all-in-cost ceilings have been dispensed with, under the approval route, until December 31, 2009, the RBI said in a notification late yesterday.

''In view of the improvement in the credit market conditions and narrowing credit spreads in the international markets, it has been decided to withdraw the existing relaxation in the all-in-cost ceilings under the approval route with effect from January 1, 2010'', the central bank said.

Eligible borrowers proposing to avail of ECB after December 31, 2009, where the loan agreement has been signed on or before December 31, 2009, should furnish a copy of the loan agreement. Such proposals would continue to be considered under the approval route, it clarified.

It has also decided to permit eligible borrowers in the telecommunication sector to avail of ECB for the purpose of payment for Spectrum allocation. This modification will come into effect with immediate effect.

In case of corporates engaged in the development of integrated township, they are permitted to avail of ECB, under the approval route, until December 31, 2009.