The Reserve Bank of India released draft rules proposing to make it easier for companies to raise funds in foreign currencies on Friday
The central bank has proposed widening the pool of borrowers and lenders eligible for external commercial borrowings and easing restrictions on their use.
Borrowing limit rules
In the draft rules, the Reserve Bank proposes linking overseas borrowing limits to a company’s financial strength, allowing firms to raise up to $1 billion or as much as 300 per cent of net worth.
The RBI stated that external commercial borrowings can be raised at market-determined interest rates.
The draft proposed simplifying the end-use restrictions and Minimum Average Maturity requirements. The draft stated that the borrower and lender base eligible for ECB transactions is proposed to be expanded to enhance opportunities for credit flow.
Furthermore, the Reserve Bank said that reporting requirements are being simplified to ease compliance obligations.
The central bank has sought feedback on the proposal till October 24 before it issues final rules.
RBI’s ECL Framework
In the last MPC meeting on October 1, the Reserve Bank of India stated that the ECL Framework (Expected Credit Loss Framework) and Basel III norms will be implemented by April 1, 2027. Furthermore, the central bank stated that drafts on standardised credit risk, prudential regulations, and risk-based insurance premiums will be issued soon.
The Reserve Bank also proposed removing regulatory restrictions on overlap in the businesses undertaken by a bank and its group entities.