Reserve Bank of India Modifies Commercial Borrowing Policy

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Dec. 14 – The Reserve Bank of India has modified its external commercial borrowing (ECB) policy; the changes will take effect from January 1, 2010.

Loan agreements signed on or after this date will attract an all-in-cost ceiling as shown in the chart.

Eligible borrowers using ECB after December 21, 2009, where the loan agreement was signed on or before December 31, 2009 and where the in-all-cost exceeds the ceilings, should submit a copy of the loan agreement to the RBI through the authorized dealer and ECB approval will be considered under the approval route.

The timeline for corporations engaged in the development of integrated township (housing, commercial premises, hotels, resorts, city and regional infrastructure, roads and bridges, manufacture of building materials, and mass rapid transport ) to avail ECB under the approval route has been extended until December 31, 2010.

The RBI has permitted non banking financial companies exclusively involved in the financing of the infrastructure sector to avail ECB from recognized lenders, including international banks, with immediate effect. This is subject to the borrowing risk fully hedging the currency risk, and AD category 1 banks certifying NBFC compliance with the prudential norms set out by the RBI.

Eligible borrowers in the telecommunications sector are permitted to avail ECB for the purpose of payment for spectrum allocation.

Foreign investors in India requiring clarification on the new ECB policy may contact Chris Devonshire-Ellis, Dezan Shira & Associates‘ managing partner for India, for assistance at