The Reserve Bank of India ("RBI") has vide its recent notification dated 4th November 2006 liberalized the External Commercial Borrowing (ECB) guidelines enabling corporates to now raise ECB for an additional USD 250 million.
Previously, corporates were permitted to avail ECBs up to a maximum cap of USD 500 million during a financial year under the automatic route with minimum average maturity period of 5 years.
As per the amended guidelines, Corporates can avail ECB for a further amount of USD 250 million with average maturity of more than 10 years under the approval route. This borrowing facility is in addition to the existing ceiling of USD 500 million under the automatic route with average five year maturity, during a financial year.
However, prepayment and call/put options would not be available to such ECBs for a period upto 10 years. RBI has further clarified that other ECB criterias such as end-use, all-in-cost ceiling, recognised lender, are not required to be compulsorily complied with.
With a view to providing flexibility to Corporates in managing their liquidity and interest costs, RBI has enhanced the limit on prepayment of ECBs, from USD 200 million to USD 300 million without its prior approval. However the same would be subject to compliance with the minimum average maturity period as applicable to the loan.
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