RBI relaxes guidelines for external commercial borrowings

The Reserve Bank of India (RBI) has authorised Category-I authorised dealer banks to allow relaxations in the drawdown and repayment schedule of external commercial borrowings.

Accordingly, designated AD Category-I banks may approve changes or modifications in the drawdown or repayment schedule of the ECBs already availed, both under the approval and the automatic routes, RBI said in a release. This would, however, be subject to the condition that the average maturity period, as declared while obtaining the loan registration number (LRN), is maintained, RBI said.

The changes in the drawdown and repayment schedule should be promptly reported to the DSIM, Reserve Bank and any elongation or rollover in the repayment on expiry of the original maturity of the ECB would require the prior approval of the central bank.

Authorised dealers are also authorised to allow changes in the currency of borrowing, if so desired, by the borrower company, in respect of ECBs availed of both under the automatic and the approval routes, subject to all other terms and conditions of the ECB remaining unchanged. AD banks should, however, ensure that the proposed currency of borrowing is freely convertible, RBI said.

AD banks may allow changes in the existing designated AD bank by the borrower company for effecting transactions pertaining to the ECBs subject to no-objection certificate (NOC) from the existing designated AD bank and after due diligence, the release said.

Changes in the name of the borrower company may also be allowed provided that the borrower produces supporting documents regarding the change in the name from the Registrar of Companies.

The modifications to the ECB guidelines will come into force with immediate effect.  All other aspects of the ECB policy, such as $500 million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged, RBI said.
  
Authorised dealers in India or their branches outside India are allowed to lend in foreign currency in the normal course of banking business.
 
ADs may also lend to overseas subsidiaries or joint ventures of Indian companies provided that not less than 51 per cent of equity in such companies are held in India, subject to compliance with the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000.
 
ADs are also authorised to extend foreign currency loans to other authorised dealers in India subject to the directions or guidelines issued by the RBI from time to time.