The Reserve Bank of India on 16th January, 2019 has rolled the new External Commercial Borrowings Framework (“New ECB Framework”). The improvements made are in line with ease of doing business. Under the New ECB Framework, all eligible borrowers can raise External Commercial Borrowing (“ECB”) up to USD 750 million or equivalent per financial year under auto route.
Key Highlights of the New ECB Framework:
- The New ECB Framework has included all entities eligible to receive Foreign Direct Investment. It has also enabled the Port Trusts, Units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, like the registered not for profit companies, registered societies/trusts/cooperatives and non-government organisations to borrow under this framework.
- Minimum Average Maturity Period (“MAMP”) will be 3 years for all ECBs. However, ECB raised from foreign equity holder and utilised for specific purposes as defined in the policy, the MAMP would be 5 years. Similarly, for ECB up to USD 50 million per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP would be 1 year.
- The four- tier structure is done away with by merging of Tracks I and II as “Foreign Currency denominated ECB” and merging of Track III and Rupee Denominated Bonds framework as “Rupee Denominated ECB”.
- The lender should be resident of Financial Action Task Force country or an International Organization of Securities Commissions compliant country. Multilateral and Regional Financial Institutions, Individuals and Foreign branches / subsidiaries of Indian banks can also be lenders.
- There is a provision for regularizing the delay of payment of late submission fee for any borrower who is otherwise compliant to the ECB guidelines.
Source: Reserve Bank of India
