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  3. RBI revises ECB norms for infrastructure sector

RBI revises ECB norms for infrastructure sector

31 Mar 2016 Evaluate

Reserve Bank of India has expanded the source of funding for the infrastructure sector by allowing them to raise shorter-term external commercial borrowings (ECBs). RBI in its revised framework notified that, taking into account prevailing external funding sources, particularly for long term lending and the critical needs of infrastructure sector of the country, the extant ECB guidelines have been reviewed in consultation with the Government of India.

RBI in its circular said that the companies in infrastructure sector, non-banking financial companies-infrastructure finance companies (NBFC-IFCs), NBFCs-asset finance companies (NBFC-AFCs), holding companies and core investment companies (CICs) will also be eligible to raise ECB under Track 1 of the framework with minimum average maturity period of 5 years, subject to 100 per cent hedging.

The central bank also said that for the purpose of ECB, “Exploration, Mining and Refinery” sectors which are not included in the Harmonised list of infrastructure sector but were eligible to take ECB under the previous ECB framework will be deemed as in the infrastructure sector, and can access ECB as applicable to infrastructure sector under.

It has further said that companies in infrastructure sector shall utilize the ECB proceeds raised under Track I for the end uses permitted for this Track. NBFCs-IFCs and NBFCs-AFCs will, however, be allowed to raise ECB only for financing infrastructure. It added that holding Companies and CICs shall use ECB proceeds only for on-lending to infrastructure Special Purpose Vehicles (SPVs). The individual limit of borrowing under the automatic route for aforesaid companies shall be as applicable to the companies in the infrastructure sector (currently $ 750 million). Also, companies in infrastructure sector, Holding Companies and CICs will continue to have the facility of raising ECB under Track II of the ECB framework subject to the conditionalities prescribed thereof.

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