The Reserve Bank of India (RBI) on Monday released the revised framework for external commercial borrowings (ECBs).
RBI said that the revised framework consists of fewer restrictions on end-uses, higher all-in-cost ceiling for long-term foreign currency borrowings as the extended term makes repayments more sustainable and minimises rollover risks for borrowers.
It also includes a more liberal approach for rupee-denominated ECBs where the currency risk is borne by the lender.
The central bank has also expanded the list of overseas lenders to include long-term lenders like sovereign wealth funds, pension funds, insurance companies and also indicated that only a small negative list of end-use requirements are applicable to long-term ECBs and rupee-denominated ECBs.
The limit for small value ECBs with a minimum average maturity (MAM) of 3 years has been raised to $50 million from the existing $20 million. The central bank has also aligned the list of infrastructure entities eligible for ECB with the Harmonised List of the Government of India.
The revised ECB framework consists of three tracks. Track 1 comprises medium term foreign currency denominated ECB with MAM of 3/5 year, track 2 consists of long term foreign currency denominated ECB with MAM of 10 years and track 3 comprises Rupee-denominated ECB with MAM of 3/5 years.
A transitional period up to March 31, 2016 has been allowed to ECBs contracted till the commencement of the revised framework and in respect of special schemes which will end by March 31, 2016.