Govt urges RBI to allow infra sector to access medium term foreign debt

28 Dec 2015 Evaluate

Government has urged Reserve Bank of India (RBI) to reconsider its external commercial borrowing (ECB) norms in order to allow foreign currency debt to infrastructure sector for medium term too. Road, Transport and Highways Secretary Vijay Chhibber has written letter to RBI Governor Raghuram Rajan and has requested him to examine the ECB policy to allow overseas borrowings under medium term also.

In November, RBI allowed infrastructure companies to access long-term foreign currency denominated ECB with maturity of 10 years (Track II) and Indian rupee-denominated ECB with average maturity of 3 to 5 years (Track III). Chhibber in its letter has said that, 'Limiting ECBs in the infrastructure sector in Track II and III only is restrictive and international lenders in the current scenario may not be forthcoming to provide long-term ECBs to Indian companies in the infrastructure space.'

Besides, Chhibber also said that many export credit agencies are required to follow OECD (Organisation for Economic Cooperation and Development) arrangements wherein a member is not permitted to extend export credit beyond a period of 10 years for all categories (except non nuclear power plants) for a category II country such as India, whereas the revised ECB framework allow Indian infrastructure companies to access long term foreign currency borrowings with a minimum average maturity of 10 years (under Track II). As per the revised ECB framework of RBI, there would be limited scope for OECD member countries to extend export credit to Indian infrastructure companies.

The central bank on November 30 announced its revised ECB norms - Track I for medium term foreign currency denominated ECB with minimum average maturity (MAM) of 3 to 5 years; Track II for long term foreign currency denominated ECB with maturity of 10 years and Track III for Indian rupee denominated ECB with average maturity of 3 to 5 years. Indian infrastructure companies are eligible for accessing ECBs only under Track II (long term foreign currency borrowings with a minimum average maturity (MAM) of 10 years) or under Track III (Indian rupee denominated ECBs with a MAM of 3/5 years).

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