RBI eases norms for external borrowings
To attract more overseas fund, the Reserve Bank of India (RBI) on Monday relaxed external commercial borrowing (ECB) norms with fewer restrictions on end uses and allowed loans from sovereign wealth funds, pension funds and insurers.
The revised framework also includes a more liberal approach for rupee-denominated ECBs where the currency risk is borne by the lender.
The guidelines also allow “raising of limit for small value external commercial borrowings (ECBs) with minimum average maturity of 3 years to $50 million from the existing $20 million”.
“The expansion of the list of overseas lenders to include longterm lenders like sovereign wealth funds, pension funds, insurance companies. Only a small negative list of end-use requirements is applicable to long-term ECBs and INR (rupee) denominated ECBs, the RBI said in a release.
The central bank further said that the policy was liberalised in consultation with the government, keeping in view the macroeconomic developments and experience gained in administering the ECB regime over the last 10 years.
The sectoral regulator said the new policy will allow a more liberal approach, with fewer restrictions on end uses, besides a higher all-in-cost ceiling for long-term foreign currency borrowings.
It said the extended term makes repayments more sustainable and minimises roll-over risks for the borrower.
The revised rule will also allow for alignment of the list of infrastructure entities eligible for ECB with the harmonised list of government.
“The framework for ECB as a means to attract flow of funds from abroad will continue to be a major tool to calibrate the policy towards capital account management in response to evolving macro-economic situation,” the RBI said.
The guidelines will be reviewed after one year based on the experience and evolving macro-economic situation, it said.