India Development News & Foreign Investment Opportunities

Indian companies allowed to raise US$750 million/year

RBI’s new policy for development

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RBI’s new policy for development

 

 

Indian companies, eligible for Foreign Direct Investment (FDI) can raise up to US$750 million per financial year through external commercial borrowing (ECB) to meet financing requirements for their projects in the country.

This comes under Reserve Bank of India’s new ECB policy, Minister of State for Finance P. Radhakrishnan told Lok Sabha on 8 Feb 2019. RBI had issued a circular on the new policy on 16 Jan 2019.

Indian entities eligible to receive Foreign Direct Investment (FDI) are permitted to raise External Commercial Borrowing (ECB) up to US$750 million or equivalent per financial year under automatic route, subject to certain terms and conditions prescribed in the Guidelines, replacing the system of sector wise limits, the minister said.

The Minimum Average Maturity Period (MAMP) has been kept at three years for all ECBs, irrespective of the amount of borrowing in lieu of various layers of MAMPs as under the earlier framework, except the borrowers specifically permitted in the circular to borrow for a shorter period.

The policy covers ECB and Rupee Denominated Bonds.

The ECB Policy framework has been incrementally calibrated over time taking into account the emerging financing needs of Indian companies, especially critical requirements of infrastructure sector entities, macroeconomic developments and to promote ease of doing business; by permitting more resident entities as eligible borrowers, recognizing more entities as lenders, expanding end-uses and rationalizing the all-in-cost and minimum maturity requirements for such borrowings.

The recent changes that have been brought-out in the ECB policy are a part of continued effort and are likely to help wider set of eligible borrowers i.e. corporates and other entities to avail ECBs to meet their capital needs with the Uniform Minimum Average Maturity Period requirements, uniform all-in-cost ceilings and small negative end-use list.

Earlier Tracks I and II of the ECB Policy Framework have been merged as “Foreign Currency Denominated ECB” and Track III and Rupee Denominated Bonds framework have been combined as “Rupee Denominated ECB” to replace the four-tiered structure.

As per the new ECB framework, the list of eligible borrowers has been expanded to include all entities eligible to receive Foreign Direct Investment (FDI).

Additionally, Port Trusts, Units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, viz., registered not for profit companies, registered societies/trusts/cooperatives and non-government organisations can also borrow under this framework.

This Expanded List of eligible borrowers will enable a wider set of Indian companies to raise ECBs up to US$750 million or equivalent per financial year under the automatic route replacing the earlier system of sector wise limits. fiinews.com

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