India Simplifies Procedures for External Commercial Borrowings

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Sept. 14 – The Reserve Bank of India (RBI) has eased the current modus operandi of external commercial borrowings (ECB) to relieve the flow of funds, likely benefiting ECB borrowers and lenders.

The RBI has given chosen AD Category-I banks the authority to support the request from the ECB borrowers with respect to changes in the documented lender when the original lender is an international bank or a multilateral financial institution (such as IFC, ADB, CDC), a regional financial institution, a government-owned development financial institution, an export credit agency, or a supplier of equipment and the new lender also belongs to any one of the above mentioned categories, under certain rigorous standards.

The RBI has given AD Category-I banks directions to make certain that the new lender is a recognized lender as per the existing ECB norms and the other terms and conditions of the ECB remain the same.

AD Category-I banks have to comply with the present ECB guidelines.

According to the previous ECB measures, any application for a change of lender for an existing ECB is necessary to be referred by the Authorized Dealer Bank to the Reserve Bank for essential sanction.

Changes in the recognized lender in the case of a foreign equity holder and foreign collaborator will continue to be examined by the RBI.

Changes in the recognized lender should be quickly reported to the Department of Statistics and Information Management, Reserve Bank of India in Form 83.

All the modifications in the ECB guidelines will be effective immediately. All other aspects of the ECB policy – such as a US$500 million limit per company per financial year under the automatic route, eligible borrower, end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements – shall remain unaffected.

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