Reserve Bank of India ("RBI") vide
its Notification no. RBI/2015-16/349 A.P. (DIR Series) Circular
No.56 dated 30 March 2016 ("the
Notification"), has revised the External Commercial
Borrowing ("ECB") Guidelines for
infrastructure companies and certain Non-Banking Financial
Institutions ("NBFCs"). It has also
issued few clarifications in respect of the Master Directions and
the circular issued on 30 November 2015.
In the last quarter of 2015, RBI had revised the ECB Guidelines.
One of the main changes brought in by RBI was segregation of the
borrowers into 'Track I', 'Track II' and 'Track
III'. Certain NBFCs and companies in the infrastructure sector
were governed by the provisions of under the Track II borrowings
and were inter-alia subject to maintenance of minimum
average maturity period of 10 years. RBI has now, by the
Notification, amended this position by allowing such companies to
avail ECBs as Track I borrowings thereby giving more flexibility in
the tenor of the loan.
Revisions made by RBI
Following are the key revisions made in the ECB Guidelines under
Infrastructure and NBFCs:-
Infrastructure Companies and certain NBFCs (i.e. the NBFCs
carrying out the business of Infrastructure Finance, Asset Finance,
Holding Companies and Core Investments) are now allowed to raise
ECBs with a minimum average maturity period of five years subject
to 100% hedging;
Companies engaged in "exploration, mining and
refinery" are now deemed as infrastructure companies and can
avail ECBs as applicable to the infrastructure sector.
The individual limit of borrowing under the automatic route for
the companies specified at item 1 above is USD 750 million.
Only those NBFCs which are under the regulatory purview of RBI
are permitted to raise an ECB. NBFCs specified at item 1(a) above
can avail ECBs under Track I scheme whereas other NBFCs can avail
ECBs under Track III scheme.
The companies mentioned at item 1 must have an approved risk
management policy by its board.
Clarifications issued by RBI
RBI has also, by the Notification, clarified ambiguities arising
from the ECB Guidelines. These are:-
ECB Guidelines are not applicable in respect of investments in
non convertible debentures in India by resident foreign portfolio
The minimum average maturity period of Foreign Currency
Convertible Bonds and Foreign Currency Exchangeable Bonds is 5
years irrespective of the amount of borrowing.
Authorised Dealer Category-I Banks are allowed to approve
refinancing of ECBs raised under the old guidelines, provided such
refinancing satisfies three conditions, namely (i) the refinancing
must be at a lower all-in-cost; (ii) the borrower continues to be
an eligible borrower under the ECB Guidelines; and (iii) the
residual maturity of the facility is not reduced.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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