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ECB Norms for Corporates, NBFCs Relaxed

  • 31 Jul 2019
  • 2 min read

With a view to further liberalise the External Commercial Borrowing (ECB) framework, Reserve Bank of India (RBI) has recently decided to relax the end-use restrictions relating to external commercial borrowings for Working Capital requirements, General Corporate purposes and Repayment of rupee loans.

  • It is a move aimed at providing access to cheaper and longer term funds for the corporate sector, especially liquidity-starved Non Banking Finance Companies (NBFCs).
  • RBI has allowed eligible borrowers to raise ECBs with a maturity period of 10 years from recognised lenders, except foreign branches and overseas subsidiaries of Indian banks.
  • ECBs with a minimum average maturity period of 10 years will be allowed for working capital purposes and general corporate purposes.
  • Borrowing for on-lending (When an organization lends money that they have borrowed from another organization or person) by non-banking financial companies for the 10 year maturity and end-use of funds is also permitted.
  • For repayment of rupee loans availed domestically for purposes other than capital expenditure and for on-lending by NBFCs for the same, the minimum average maturity period of the ECB would have to be 10 years.
  • RBI also allowed ECBs with a minimum average maturity period of 7 years for repayment of rupee loans availed domestically for capital expenditure.
  • The borrowings for on-lending by NBFCs for the repayment of rupee loans would also be permitted.

Source: IE

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