Norms for external commercial borrowings eased

New Delhi: The Government on Monday relaxed guidelines governing external commercial borrowings (ECBs).

The changes effected include removal of the end-use restrictions, revision of the maximum spreads relative to the six-month London Inter-bank Offered Rates (Libor), besides specification of new norms for raising such borrowings under the automatic route.

The Ministry has now specified that ECBs up to $ 500 million can come in through the automatic route, provided the average maturity of the borrowing is over five years. Hitherto, ECBs only up to $ 50 million were permitted under the automatic route.

The latest changes also specify a $ 20-million limit under the automatic route for ECBs of three-five years' average maturity.

All cases falling outside the purview of the automatic route under the new liberalised ECB policy will now be decided by an empowered committee of the Reserve Bank of India.
The central bank will also prescribe the reporting mechanism for ECBs coming under the automatic route.

Simplifying the criteria for interest rate spreads, the Government has now specified two slabs based on the average maturity of such borrowings. For ECBs with average maturity of three-five years, the maximum spread has been stipulated at 200 basis points over the six-month Libor.

In the case of ECBs with average maturity of over five years, the maximum spread over the six-month Libor has been specified at 350 basis points over Libor.