With an aim to help Indian companies, the Reserve Bank of India (RBI) has relaxed norms for external commercial borrowings (ECBs). The RBI has reduced hedging requirements for external commercial borrowings (ECBs) to 70% from 100%.
The relaxed norms will apply to the ECBs with a maturity period between 3 and 5 years. The RBI also clarified that the ECBs raised prior to this circular will be required to mandatorily roll over their existing hedge only to the extent of 70% of outstanding ECB exposure.
The move will help Indian companies borrow funds relatively cheaply as hedging cost added up substantially to the final cost. This will also certainly help bring down the cost from overseas sources for India companies.