Norms for external commercial borrowings eased
By Our Banking Bureau | 20 Jan 2004
New Delhi: The Government on Monday relaxed guidelines governing external commercial borrowings (ECBs).
The
changes effected include removal of the end-use restrictions,
revision of the maximum spreads relative to the six-month
London Inter-bank Offered Rates (Libor), besides specification
of new norms for raising such borrowings under the automatic
route.
The Ministry has now specified that ECBs up to $ 500 million can come in through the automatic route, provided the average maturity of the borrowing is over five years. Hitherto, ECBs only up to $ 50 million were permitted under the automatic route.
The latest changes also specify a $ 20-million limit under the automatic route for ECBs of three-five years' average maturity.
All
cases falling outside the purview of the automatic route
under the new liberalised ECB policy will now be decided
by an empowered committee of the Reserve Bank of India.
The central bank will also prescribe the reporting mechanism
for ECBs coming under the automatic route.
Simplifying the criteria for interest rate spreads, the Government has now specified two slabs based on the average maturity of such borrowings. For ECBs with average maturity of three-five years, the maximum spread has been stipulated at 200 basis points over the six-month Libor.
In
the case of ECBs with average maturity of over five
years, the maximum spread over the six-month Libor has
been specified at 350 basis points over Libor.