On 27 April 2018, the Reserve Bank of India through "RBI/2017-18/169 A.P. (DIR Series) Circular No.25" amended the External Commercial Borrowings (ECB) policy rationalizing and liberalizing certain provisions as below -
- The all-in-cost ceiling rates for such borrowings in foreign or Indian currency has been rationalized. The ceiling rate for foreign currency ECBs with a maturity of 3 to 5 years, 5 to 10 years and more than 10 years has been rationalised from 6 months LIBOR + 300 basis points, 6 months LIBOR + 450 basis months, and 6 months LIBOR + 500 basis points respectively to 6 months LIBOR + 450 basis points for all. Further, the ceiling rate of rupee-denominated bonds has been amended from "in line with market conditions" to the prevailing yield of Indian Government's securities of similar maturity.
- In case of ECB borrowings from a direct equity holder, the ECB liability to Equity Ratio for such equity holders has been increased from 4 times of the equity to 7 times of the equity owned. The ratio is not applicable if total ECBs raised by the entity is under USD 5 million.
- Additional entities have been permitted to raise funds through ECBs. These include Housing Finance Companies, Port Trusts and entities engaged in the Maintenance, Repair and Overhaul and freight forwarding. The last mentioned entity can only raise bonds denominated in Indian Rupees.
- Further, earlier the ECB guidelines listed a positive end-use list for borrowings of a period of 3-5 years maturity and a negative list for borrowings of a period more than 5 years. The guidelines now have a negative list for all borrowings and have thereby increased the scope of end-use for such borrowings.