1. External Commercial Borrowings (ECB) in Indian Rupees
RBI has with a view to provide greater flexibility for structuring of ECB arrangements announced vide its circular RBI/2014-15/207 A.P. (DIR Series) Circular No.25 dated September 3, 2014, that recognised non-resident ECB lenders may extend loans in Indian Rupees subject to the following conditions:
- The lender should mobilise Indian Rupees through swaps undertaken with an Authorised Dealer Category-I bank in India.
- The ECB contract should comply with all other conditions applicable to the automatic and approval routes as the case may be.
- The all-in-cost of such ECBs should be commensurate with prevailing market conditions.
3. For the purpose of executing swaps for ECBs denominated in Indian Rupees, the recognised ECB lender, if it desires, may set up a representative office in India following the prescribed laid down process.
4. It may be noted that the hedging arrangement for ECBs denominated in Indian Rupees extended by non-resident equity-holders shall continue to be governed by the provisions of AP (DIR Series) Circular No. 63 dated December 29, 2011.
2. Refinancing of ECB at lower all-in-cost – Simplification of procedure
RBI has vide its circular RBI/2014-15/196 A.P. (DIR Series) Circular No.21 dated August 27, 2014 decided to simplify the procedure by delegating powers to the AD Category – I banks to approve even those cases where the Average Maturity Period (AMP) of the fresh ECB is exceeding the residual maturity of existing ECB, under the automatic route subject to the following conditions:
- Both the existing and fresh ECBs should be in compliance with the applicable guidelines;
- All-in-cost of fresh ECB should be less than that of the all-in-cost of existing ECB;
- Consent of the existing lender is available;
- Refinancing is to be undertaken before the maturity of the existing ECB;
- Borrower should not be in the default / Caution List of RBI and should not be under the investigation of the Directorate of Enforcement (DoE);
- Overseas branches / subsidiaries of Indian banks will not be permitted to extend ECB for refinancing an existing ECB; and
- All requirements in respect of reporting arrangements like filing of revised Form 83, etc. are followed.
3. This facility will be available even in those cases where existing ECBs were raised under the approval route subject to the amount of new ECBs being eligible to be raised under the automatic route.
4. All other aspects of the ECB policy like eligible borrower, recognized lender, permitted end-use, amount of ECB, all-in-cost, average maturity period, reporting arrangements, etc. shall remain unchanged.
5. The modification to the ECB policy will come into force with immediate effect.