The Reserve Bank of India on Monday eased rules for non-banking finance company-asset finance companies (NBFC-AFCs) to raise external commercial borrowings (ECBs) by allowing the lenders to raise such funds through the automatic route as against the approval route earlier, in a step aimed at improving dollar supply amid a weakening rupee.
NBFC-AFCs can raise offshore debt up to $200 million in a financial year to finance import of infrastructure equipment, the central bank said.
“NBFC-AFCs are allowed to avail of ECB under the automatic route from all recognised lenders as per the extant ECB guidelines with minimum average maturity period of five years in order to finance the import of infrastructure equipment for leasing to infrastructure projects. Such ECBs (including outstanding ECBs) under the automatic route can be availed up to 75 per cent of owned funds of NBFC-AFCs, subject to a maximum of $ 200 million or its equivalent per financial year,” it said.
ECBs by AFCs above 75 per cent of their owned funds will be considered under approval route by Reserve Bank and the currency risk of such ECBs is required to be hedged in full, the RBI said.