|
| RBI simplifies ECB procedure |
| BS Reporter / Mumbai Feb 10, 2010, 00:25 IST |
|
Banks can tweak certain terms on their own.
In a move that will simplify and speed up external commercial borrowing (ECB) transactions, the Reserve Bank of India (RBI) today allowed banks to tweak certain terms without its prior approval.
Accordingly, loan arrangers will be able to make changes in the drawdown or repayment schedules as long as the average maturity of the loan remains the same. The change is applicable for transactions through both approval and automatic routes.
BREAK-UP OF INFLOWS
Y-o-Y ECB in $ million |
| Month |
2008 |
2009 |
% change |
| April |
940.82 |
286.13 |
-69.59 |
| May |
1026.05 |
433.29 |
-57.77 |
| June |
1577.25 |
1919.04 |
21.67 |
| July |
2471.81 |
1925.22 |
-22.11 |
| August |
1368.87 |
1074.57 |
-21.50 |
| September |
2834.95 |
1334.57 |
-52.92 |
| October |
1125.23 |
710.72 |
-36.84 |
| November |
1702.48 |
948.67 |
-44.28 |
| December |
1669.18 |
1481.49 |
-11.24 |
| Total |
14716.64 |
10113.69 |
-31.28 |
| Source : RBI |
Indian companies are allowed to borrow up to $500 million a year without prior RBI approval. Any further borrowing needs RBI’s approval. Also, changes in currency need not be approved by RBI.
“Designated AD (authorised dealer) Category I banks may allow changes in the currency of borrowing, if so desired by the borrower company, in respect of ECBs availed of both under automatic and approval routes, subject to all other terms and conditions remaining unchanged,” said RBI’s circular. This is used when a borrower wants to shift from a volatile currency to a more stable currency. In addition, RBI approval will not required if a borrower wishes to switch to another bank as long as he secures a no-objection certificate from the first lender.
This facility is usually used when a borrower wants to switch from a higher interest rate to a lower interest and is unable to reach an agreement with his existing loan arranger.
Banker said the move will simplify the ECB procedure. However, it is unlikely to have an impact on ECB volumes or overhead costs. “Basically, this will smoothen the procedure and make it less time-consuming. RBI has allowed banks to play a greater role in the process,” said Joiel Akilan, chief representative, BBVA. ECB volumes have picked up substantially from a low of $ 286 million in April. In December 2009, Indian companies borrowed $1.48 billion from overseas loan markets.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
