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ECB policy further liberalised




The External Commercial Borrowing (ECB) policy is regularly reviewed by the Government in consultation with Reserve Bank of India (RBI) to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, etc.

At present borrowers are allowed to avail ECBs up to USD 500 million under the Automatic Route for import of capital goods and overseas acquisition. In May 2008, it was decided to allow companies to borrow USD 50 million for Rupee Capital expenditure under the Approval route. Similarly, companies in the infrastructure sector are allowed to avail upto USD 100 million for Rupee capital expenditure under the Approval Route.

On a review, it has been decided to further liberalise the ECB policy as under:

At present, borrowers in infrastructure sector are allowed to avail ECB up to USD 100 million for Rupee expenditure for permissible end-uses under the Approval Route. Considering the huge funding requirements, particularly for meeting Rupee expenditure, it has been decided to enhance the existing limit of USD 100 million to USD 500 million per year for the borrowers in the infrastructure sector under the Approval Route. Borrowings in excess of USD 100 million should have a minimum average maturity of 7 years.  

In view of widening credit spreads in the International financial markets, it has been decided to modify the all-in-cost ceilings in respect of ECBs with minimum average maturity of over seven years. The revised all-in cost ceilings for ECBs will now be:

Average Maturity Period

All-in-Cost ceilings over 6 Months LIBOR







Three years and up to five years

200 bps

200 bps

More than five years and up to seven years

350 bps

350 bps

More than seven years

350 bps

450 bps

As regards companies other than those in infrastructure sector the decision of May 2008, to allow them to borrow upto USD 50 million for Rupee Capital expenditure under the Approval route, remains unchanged.

All other aspects of ECB policy such as USD 500 million limit per company per year under the Automatic Route, eligible borrower, recognised lender, end-use of foreign currency expenditure for import of capital goods and overseas investments, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements also remain unchanged.

The above amendments in ECB policy will come into force on the date of Notification of Regulations / directions issued by the Reserve Bank in this regard under the Foreign Exchange Management Act, 1999.

on 24 September 2008
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