Amid liquidity squeeze and concerns over availability of funds, the Reserve Bank of India (RBI) has relaxed the norms governing foreign borrowings for infrastructure creation in consultation with the Government. The minimum average maturity requirement for ECBs (external commercial borrowings) in the infrastructure space raised by eligible borrowers has been reduced to three years from five years earlier.
Additionally, the average maturity requirement for mandatory hedging has been reduced to five years from earlier ten years. The move comes amid concerns surrounding the availability of funds following a liquidity squeeze and the difficulties being faced by non-bank lenders, especially those facing asset liability issues due to heavy reliance on short term funding for long term assets.
The government has been unequivocal in suggesting remedial measures which will address the needs of the economy. Besides, the relaxations in the ECB norms follow other moves by the RBI, including permission to banks to use credit enhancement to help Non-Banking Financial Companies (NBFCs) raise medium to long term funds.