In a bid to boost stressed firms, the Reserve Bank of India (RBI) on Tuesday relaxed end-use provisions under the external commercial borrowings (ECBs) framework for corporates and NBFCs. The NBFCs can raise 10 year forex debt for on-lending for working purposes and 7 year forex loans for domestic capex, the RBI added. The stressed companies may avail of forex loans to reay rupee debt, it also said. “For repayment of rupee loans availed domestically for purposes other than capital expenditure and for on-lending by non-banking financial companies (NBFCs) for the same, the minimum average maturity period of the ECB is required to be 10 years,” it said.
The relaxation was announced for loans with a maturity of 10 and 7 years. The central bank also announced that the loans may be used by the companies for working capital and general purposes. “It has been decided to permit eligible corporate borrowers to avail ECB for repayment of rupee loans availed domestically for capital expenditure in manufacturing and infrastructure sector if classified as SMA-2 or NPA, under any one time settlement with lenders,” it said.
In January this year, the central bank had raised borrowing limits, reduced maturity tenor and removed qualification restrictions for companies looking to raise capital through overseas markets. According to the apex bank, the changes were to simplify norms and make it easier for corporates to borrow overseas.
“The system-wide impact is likely to be limited, as there has been little recent issuance of Masala bonds or foreign-currency debt with a minimum average maturity of 10 years – which can no longer be used to refinance local-currency debt. Nevertheless, some companies may need to revise their funding plans,” it had then said in a statement.