RBI relaxes rules on External Commercial Borrowings (ECB)

The Reserve Bank of India relaxed rules for rescheduling/restructuring of ECBs by permitting an increase in the total cost of borrowing offshore. In suppression of earlier provisions, the banking regulator has delegated powers to the designated AD category-I banks to allow changes/modification in the draw-down and repayment schedules notwithstanding the average maturity period or changes (decrease/increase) in the all in the cost of such overseas borrowings. powers have been delegated to the banks as a measure of simplification, irrespective of numbers of occasions, to deal with cases related to changes/modification, reduction in the amount of ECB, the increase in all-in-cost of ECB.
The delegated powers are subject to ensuring the following stipulations.
i. Revised average maturity period and/or all-in-cost is/are in conformity with the applicable ceilings/guidelines and the changes are effected during the tenure of the ECB.
ii. If the lender is an overseas branch/subsidiary of an Indian Bank, the changes shall be subject to the applicable prudential norms.
iii. Powers are delegated to the designated AD banks to permit changes in the name of lender of ECB after satisfying themselves with the bonafides of the transactions. While allowing transactions banks have to ensure that the ECB continues to be in compliance of applicable guidelines.
iv. Further, the AD Category-I banks may also allow the cases requiring transfer of the ECB from one company to another on account of re-organisation at the borrower’s level in the form of merger / demerger / amalgamation / acquisition duly as per the applicable laws / rules after satisfying themselves that the company acquiring the ECB is an eligible borrower and ECB continues to be in compliance with applicable guidelines.
As per RBI communiqué dated 23.01.2015, the modification to the ECB policy will come into force with immediate effect. These measures of simplification will be applicable for ECBs raised both under the automatic and approval routes. FCCBs (Foreign Currency Convertible Bonds) will, however, not be covered under these provisions.

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