In its bid to help Indian corporates to access higher quantum of overseas funds, the country’s central bank - Reserve Bank of India reduced the minimum maturity period for external commercial borrowing (ECB) up to $20 million to three years as against the previous five years. The central bank also raised the annual limit of Foreign Currency Convertible Bonds (FCCBs) for companies to $750 million as against $500 million in a fiscal year under the automatic route that does not require prior regulator’s approval.
The RBI’s decision will not only help Indian corporate across all segments to access higher quantum of overseas funds but also encourage greater inflow of foreign exchange. It will encourage domestic firms to raise money through FCCBs up to $20-750 million without the RBI’s permission and can repay the debt in 3-5 years time.
In the specified service sectors like hotels, hospitals and software, corporate can raise FCCBs up to $200 million against the earlier limit of $100 million, subject to the condition that the proceeds would not be used for acquisition of land. For Non Government Organizations (NGOs) the ECB limit under automatic route has been doubled to $10 million from $5 million.
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