RBI liberalises the External Commercial Borrowings Policy

Oct 04, 2018 | by Avantis RegTech Legal Research Team


The Reserve bank of India on October 3, 2018 has liberalised the provision of Paragraphs 2.4.5, 2.4.6 which specifies parameter for External Commercial Borrowings (ECBs) and 2.5 which specifies hedging requirements for the entities raising ECB of Master Direction No.5 dated January 1, 2016 on “External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers”, and permits public sector Oil Marketing Companies (OMCs) to raise ECB for working capital purposes with minimum average maturity period of 3/5 years from all recognized lenders under the automatic route.

·         Under the extant policy, ECB can be raised under tracks I and III for working capital purposes if such ECB is raised from direct and indirect equity holders or from a group company, provided the loan is for a minimum average maturity of 5 years. It has been decided, in consultation with the Government of India, to liberalise the said provision and permit public sector Oil Marketing Companies (OMCs) to raise ECB for working capital purposes with minimum average maturity period of 3/5 years from all recognized lenders under the automatic route.

·         Further, the individual limit of USD 750 million or equivalent and mandatory hedging requirements as per the ECB framework have also been waived for borrowings under this dispensation. However, OMCs should have a Board approved forex mark to market procedure and prudent risk management policy, for such ECBs.

·         The overall ceiling for such ECBs shall be USD 10 billion equivalent and the said facility will come into effect from the date of the Circular. All other provisions of the ECB policy shall remain unchanged.

 

[RBI/2018-2019/54]

URL: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI54C3EF4D0A902648CA946160D9D97F2FDE.PDF


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