Saturday, November 15, 2008

EXTERNAL COMMERCIAL BORROWINGS POLICY: LIBERALISATION


  • ECB up to USD 500 million per borrower per financial year would be permitted for Rupee Expenditure and / or foreign currency expenditure for permissible end - uses under the Automatic Route. Accordingly, the requirement of minimum average maturity period of seven years for ECB more than USD 100 million for Rupee capital expenditure by the borrowers in the infrastructure sector has been dispensed.
  • Parking of Funds: It has now been decided that henceforth the borrowers will be extended the flexibility to either keep these funds off-shore as above or keep it with the overseas branches /subsidiaries of Indian banks abroad or to remit these funds to India for credit to their Rupee accounts with AD Category I banks in India, pending utilization for permissible end-uses. However, the rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.
  • Hedging: Keeping in view the risks associated with unhedged foreign exchange exposures of SMEs, a system of monitoring such unhedged exposures by the banks on a regular basis is being put in place.
  • End-use-Definition of infrastructure sector: It has been decided to expand the definition of Infrastructure sector for the purpose of availing of ECB. Accordingly, the Infrastructure sector would henceforth be defined as (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport (vi) industrial parks (vii) urban infrastructure (water supply, sanitation and sewage projects) and (viii) mining, exploration and refining. Payment for obtaining license/permit for 3G Spectrum will be considered an eligible end-use for the purpose of ECB.
  • Other conditions: All other aspects of ECB policy such as USD 500 million limit per company per financial year under the Automatic Route, eligible borrower, recognized lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged

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