RBI liberalises ECB norms by relaxing end-use restrictions

The Reserve Bank of India (RBI) on Tuesday further liberalised the norms related to external commercial borrowing (ECB) by relaxing the end-use restrictions with regard to working capital, general corporate purpose and repayment of rupee loans.

The changes, the RBI said, have been made after receiving feedback from stakeholders.

Accordingly, eligible borrowers will now be allowed to raise following ECBs from recognised lenders, except foreign branches and overseas subsidiaries of Indian banks, with a minimum average maturity period of 10 years for working capital purposes and general corporate purposes.

Borrowing for on-lending by NBFCs for the above maturity and end-uses is also permitted, the RBI said.

Borrowers will be also allowed to raise 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.

"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," it added.

The central bank further decided to permit eligible corporate borrowers to avail ECB for repayment of rupee loans availed domestically for capital expenditure in manufacturing and infrastructure sector and classified as SMA - 2 (special mention account) or NPA, under any one-time settlement arrangement with lenders.

As per the latest changes, lender banks are also permitted to sell, through assignment, such loans to eligible ECB lenders, except foreign branches/ overseas subsidiaries of Indian banks, provided, the resultant ECB complies norms.