The Reserve Bank of India (RBI) has relaxed the external commercial borrowing (ECB) policy for the 2G spectrum auction, keeping in view the large outlay of funds required to be paid directly to the government within a limited period of time.
According to the RBI, successful bidders making upfront payment for the award of 2G spectrum initially out of rupee loans availed of from the domestic lenders would be eligible for refinancing such rupee loans with a long-term ECB, under the automatic route. This will be subject to the condition that the long-term ECB should be raised within a period of 18 months from the date of sanction of such rupee loans for the stated purpose from the domestic lenders.
Other condition say the bank has evidenced the payment of upfront fees to the government in the form of a receipt from Department of Telecom and the bank should monitor the end-use of funds.
“The successful bidders in the 2G auction will be allowed to avail of ECB under the ‘automatic route’ from their ultimate parent company without any maximum ECB liability-equity ratio subject to the condition that the lender holds minimum paid-up equity of 25 per cent in the borrower company, either directly or indirectly,” the RBI said in a notification.
It said the successful bidders can avail of short-term foreign currency loan in the nature of bridge finance under the ‘automatic route’ for the purpose of making upfront payment towards 2G spectrum allocation and replace the same with a long-term ECB under the automatic route subject to the condition that the long-term ECB is raised within a period of 18 months from the date of drawdown of bridge finance.
“The relaxations in respect of the ECB liability-equity ratio, percentage of shareholding by the ultimate parent, refinancing of rupee loans and bridge finance are part of a special dispensation applicable only to the successful bidders in the upcoming 2G spectrum auction,” the RBI said.
All other aspects of ECB policy, such as $750 million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, average maturity period, all-in-cost, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged, it said.