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New Policy for Overseas Borrowings introduced - (08 Feb 2019)

Banking

Reserve Bank of India (RBI), in consultation with the Government of India (GoI), decides to rationalize the framework for External Commercial Borrowing (ECB) and Rupee Denominated Bonds. A new Policy vide A.P. (DIR Series) Circular No. 17 dated January 16, 2019 is notified. The step is an ongoing effort to further improve the ease of doing business. According to New Policy, all entities eligible to receive Foreign Direct Investment (FDI) are permitted to raise ECBs up to USD 750 million or equivalent per financial year under automatic route subject to certain terms and conditions prescribed in the Guidelines. The Minimum Average Maturity Period (MAMP) has been kept at 3 years for all ECBs, irrespective of the amount of borrowing in lieu of various layers of MAMPs as under the earlier framework, except the borrowers specifically permitted in the circular to borrow for a shorter period.

The ECB Policy framework has been expanded due to the emerging financing needs of Indian companies, especially critical requirements of infrastructure sector entities, macro-economic developments and to promote ease of doing business. Further, it would permit more resident entities as eligible borrowers, recognise more entities as lenders, expanding end-uses and rationalizing the all-in-cost and minimum maturity requirements for such borrowings. The recent changes brought-out in the ECB policy are a part of continued effort and are likely to help wider set of eligible borrowers i.e. corporate and other entities to avail ECBs to meet their capital needs with the Uniform Minimum Average Maturity Period requirements, uniform all-in-cost ceilings and small negative end-use list.

Earlier Tracks I and II of the ECB Policy Framework have been merged as “Foreign Currency Denominated ECB” and Track III and Rupee Denominated Bonds framework have been combined as “Rupee Denominated ECB” to replace the four-tiered structure. Now, the new ECB framework expands the list of eligible borrowers to include all entities eligible to receive FDI. Additionally, Port Trusts, Units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, viz., registered not for profit companies, registered societies/trusts/cooperatives and non-government organisations can also borrow under this framework. The Expanded List of eligible borrowers will enable a wider set of Indian companies to raise ECBs up to USD 750 million or equivalent per financial year under the automatic route thereby replacing the earlier system of sector wise limits.

Tags : POLICY   OVERSEAS BORROWINGS   RATIONALIZATION  

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