This content is from: Local Insights

Commercial borrowing

The Reserve Bank of India (RBI) has liberalized India's external commercial borrowing (ECB) guidelines, enabling corporates to raise an additional $250 million of ECB.

Previously, a corporate's external commercial borrowing was capped at $500 million during a financial year under the automatic route, with a minimum average maturity period of five years.

Under the amended guidelines, corporates can extend ECB by a further $250 million, with an average maturity of more than 10 years under the approval route. This borrowing facility is in addition to the existing ceiling of $500 million.

However, prepayment and call/put options would not be available to such ECBs for up to 10 years. RBI has further clarified that meeting other ECB criteria, such as end-use, the all-in cost ceiling, and recognized lenders, is not compulsory.

With a view to providing flexibility to corporates in managing their liquidity and interest costs, RBI has enhanced the limit on prepayment of ECBs without its prior approval, from $200 million to $300 million. However corporates would be subject to compliance with the minimum average maturity period that applies to the loan.

By Shardul Thacker

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