Relaxation in ecb norms !!!

Relaxation in ECB Norms

The continuous diminution of rupee value and drop in Forex inflows has put the government in tremendous pressure to take corrective measures. In order to bridge the gap between demand and supply of foreign exchange, the Government has taken certain steps to make it easy for corporate to raise funds. One such current measure taken by the government is relaxation of norms for availing External Commercial Borrowing (ECB). In order to keep the above in view, the Reserve Bank of India (RBI) vide A. P. (DIR Series) Circular No.64 dated 5th January, 2012, has relaxed the External Commercial Borrowings (ECB) Norms through following amendments in ECB regulations:

1. The limit for raising ECB by any eligible borrower has been changed. Both ECB and FCCB can now be raised up to USD 750 million under automatic route in place of existing limit of USD 500 million.

2. The requirement of average maturity period , prepayment and call/put options conditions for availing additional ECB up to USD 250 million has been done away with.

3.  ECB/FCCB availed for the purpose of refinancing the existing outstanding FCCB is to be taken as a part of revised limit of USD 750 million instead of the old Limit of USD 500 million.

It is expected that further relaxation of the ECB Norms by RBI will increase the flow of FOREX into the economy and ease the pressure on demand of US Dollar. It will also help Indian companies to raise additional foreign currency debt which are much cheaper as compared to Indian loans which have become costlier due to increased interest rates of domestic banks.

Circular is attached herewith for your record.

Regards