Guidelines for ECB for structured obligations
The Reserve Bank of India (RBI) has issued guidelines for ECBs for structured obligations. The details are as under:-
- As per the extant guidelines, credit enhancement is permitted to be provided by multilateral / regional financial institutions, Government owned development financial institutions, direct/indirect foreign equity holder(s) under the automatic route for domestic debt raised through issue of capital market instruments.
- The Reserve Bank of India (RBI) has decided that credit enhancement can be provided by eligible non-resident entities to the domestic debt raised through issue of INR bonds/ debentures by all borrowers eligible to raise ECB under the automatic route.
- The minimum average maturity of the underlying debt instruments has been reduced from seven years to three years. Prepayment and call/put options, however, would not be permissible for such capital market instruments up to an average maturity period of 3 years.
- On invocation of such credit enhancement, if the guarantor meets the liability and if the same is permissible to be repaid in foreign currency to the eligible non-resident entity, the all-in-cost ceilings, as applicable to the relevant maturity period of the Trade Credit / ECBs as per extant guidelines, would apply to the novated loan.