ECB Norms for Corporates, NBFCs Relaxed | 31 Jul 2019
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.