RBI eases rules for recasting overseas loans
23 Jan 2015
Reserve Bank of India (RBI) has relaxed rules for companies and banks to restructure and reschedule existing overseas borrowings, including an increase in the total cost of borrowing offshore.
It has delegated powers to the designated authorised banks to allow changes or modifications (irrespective of the number of occasions) in the draw-down and repayment schedules of the ECB, whether associated with change in the average maturity period or not and / or with changes (increase/decrease) in the all-in-cost.
The banking regulator also allowed changes in the drawdown and repayment schedules of such overseas borrowings, the Reserve Bank of India said in a release on Friday.
The easing of rules will, however, not be applicable for foreign currency convertible bonds, RBI said.
For this, authorised banks must ensure that the revised average maturity period and / or all-in-cost is / are in conformity with the applicable ceilings / guidelines and that the changes are effected during the tenure of the ECB.
If the lender is an overseas branch / subsidiary of an Indian bank, the changes would be subject to the applicable prudential norms.
RBI has also authorised banks to permit changes in the name of the lender of ECB after satisfying themselves with the bonafides of the transactions and ensuring that the ECB continues to be in compliance with applicable guidelines.
Further, the banks may also allow the cases requiring transfer of the ECB from one company to another on account of re-organisation at the borrower's level in the form of merger / demerger / amalgamation / acquisition duly as per the applicable laws / rules after satisfying themselves that the company acquiring the ECB is an eligible borrower and ECB continues to be in compliance with applicable guidelines.
These measures will be applicable for ECBs raised both under the automatic and approval routes. FCCBs will, however, not be covered within these provisions. The modification to the ECB policy will come into force with immediate effect. All other aspects of the ECB policy shall remain unchanged, RBI said.
Indian firms have been finding it difficult to restructure existing borrowings after facing a sharp slowdown in the economy.
