The Reserve Bank of India (RBI) on Wednesday simplified external commercial borrowing (ECB) norms. The central bank also allowed companies to raise fresh funds through ECBs where the average maturity period (AMP) exceeds the residual maturity of the existing ECB under automatic route, with certain riders.
RBI said the company should meet the conditions like all-in-cost of fresh ECB must be less than that of the all-in-cost of existing ECB. Consent of the existing lender must also be available. Other conditions include the refinancing shall be undertaken before the maturity of the existing ECB and the borrower must neither be in the RBI’s defaulter list and nor under the investigation of the Directorate of Enforcement (DoE).
Companies are allowed to refinance existing ECB by raising fresh ECB at lower all-in-cost on condition that the outstanding maturity of the original loan is maintained.
“Cases, where the average maturity period (AMP) of the fresh ECB is more than the residual maturity of existing ECB, are examined by RBI under the approval route,” RBI said.
ECB for investment, especially infrastructure sector, is under automatic route and does not require RBI or government approval.