Companies can raise $750 mn yearly via external commercial borrowings: RBI

The Reserve Bank of India (RBI) on Wednesday allowed entities that are eligible to receive foreign direct investment (FDI) to raise external commercial borrowings (ECBs), by enabling them to raise funds through automatic route up to $750 million per year. The ECBs raised would be within the overall cap set by the regulator on December 20 last year — at 6.5 per cent of gross domestic product. The limit worked out to $160 billion, against the total outstanding ECB stock of $126.29 billion as on September 30, 2018.

The minimum maturity profile of the ECBs should be three years, except certain cases. The all-in-cost remains unchanged at London Interbank Offered Rate (Libor) plus 450 basis points. 

For rupee-denominated bonds, the maximum spread would be 450 basis points per annum over the prevailing government bond yield.

Earlier, there were sector wise limits about how much a company under a particular sector can raise. Companies raise ECB money under automatic route and approval route. Under automatic route, a company doesn’t need to take permission of the RBI, whereas for the later, prior approval has to be taken.

The proceeds will have to be parked overseas, pending utilisation for permissible end-uses, the RBI said.