RBI/2008-09/343
A.P.
(DIR Series) Circular No. 46 January
2, 2009 To All Category-I Authorised Dealer Banks Madam / Sir,
External Commercial Borrowings (ECB) Policy - Liberalisation
Attention of Authorised Dealer Category - I (AD Category -
I) banks is invited to the A.P.
(DIR Series) Circular No. 26 dated October 22, 2008 relating to External Commercial
Borrowings (ECB). 2. On a review, it has been decided to
modify some aspects of the ECB policy as indicated below :
(i) As per extant ECB policy, the all-in-cost ceilings for
ECBs, in respect of both Automatic as well as Approval routes are as under:
| Average
Maturity Period |
All-in-Cost ceilings over
6 Months LIBOR* | |
Three years and up to five years |
300 bps | |
More than five years |
500 bps | | *
for the respective currency of borrowing or applicable benchmark. |
It
has now been decided to dispense with the requirement of all-in-cost ceilings
on ECB until June 30, 2009. Accordingly, eligible borrowers, proposing to avail
of ECB beyond the permissible all-in-cost ceilings specified above may approach
the Reserve Bank under the Approval Route. This relaxation in all-in-cost ceiling
will be reviewed in June 2009. (ii) In May, 2007, Reserve
Bank had withdrawn the exemption accorded to the 'development of integrated township'
as a permissible end-use of ECB. It has now been decided to permit corporates,
engaged in the development of integrated township, as defined in Press Note 3
(2002 Series) dated January 04, 2002, issued by DIPP, Ministry of Commerce &
Industry, Government of India to avail of ECB under the Approval Route. Integrated
township, as defined above, includes housing, commercial premises, hotels, resorts,
city and regional level urban infrastructure facilities such as roads and bridges,
mass rapid transit systems and manufacture of building materials. Development
of land and providing allied infrastructure forms an integrated part of township’s
development. The minimum area to be developed should be 100 acres for which norms
and standards are to be followed as per local bye-laws / rules. In the absence
of such bye-laws/rules, a minimum of two thousand dwelling units for about ten
thousand population will need to be developed. The policy will be reviewed in
June 2009. (iii) As
per the extant ECB policy, Non-Banking Financial Companies (NBFCs) are permitted
to avail of ECB for a minimum average maturity period of five years to finance
import of infrastructure equipments for leasing to infrastructure projects in
India. It has now been decided to allow NBFCs, which are exclusively involved
in financing of the infrastructure sector, to avail of ECBs from multilateral
/ regional financial institutions and Government owned development financial institutions
for on-lending to the borrowers in the infrastructure sector under the Approval
route. While considering the applications, Reserve Bank will take into account
the aggregate commitment of these lenders directly to infrastructure projects
in India. The direct lending portfolio of the above lenders vis-à-vis their
total ECB lending to NBFCs, at any point of time should not be less than 3:1.
AD Category - I banks should obtain a certificate from the eligible lenders to
this effect. This facility will be reviewed in June 2009. (iv)
At present, entities in the services sector viz. Hotels, Hospitals and Software
sector are allowed to avail of ECB up to USD 100 million per financial year for
import of capital goods, under the Approval route. It has now been decided to
permit the corporates in the Hotels, Hospitals and Software sectors to avail of
ECB up to USD 100 million per financial year, under the Automatic Route, for foreign
currency and / or Rupee capital expenditure for permissible end-use. The proceeds
of the ECBs should not be used for acquisition of land. 3.
The modifications to the ECB guidelines will come into force with immediate effect.
All other aspects of ECB policy, such as USD 500 million limit per company per
financial year under the Automatic Route, eligible borrower, recognised lender,
end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing
of existing ECB and reporting arrangements remain unchanged. 4.
Necessary amendments to the Foreign Exchange Management (Borrowing or Lending
in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately.
5. AD Category - I banks may bring the contents of this
circular to the notice of their constituents and customers concerned. 6.
The directions contained in this circular have been issued under sections 10(4)
and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without
prejudice to permissions/approvals, if any, required under any other law. Yours
faithfully, (D. Mishra)
Chief General Manager |
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