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Sunday, Feb 01, 2004

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Easier ECB norms come into effect

Our Bureau

Mumbai , Jan. 31

THE Reserve Bank of India on Saturday notified that the external commercial borrowing (ECB) relaxations recently announced by the Union Government will come into effect from February 1.

The ECB limit under the automatic route requiring no prior approval from the RBI has been lifted to $500 million for loans having minimum maturity of five years, as long as the loans are for investment in industrial, infrastructure sector or for acquisition of shares under the Government's disinvestments programme of PSU shares. The previous limit for automatic route had been set at $50 million. It has also specified another approved category of loans up to $20 million with minimum average maturity of three years, said a release from RBI.

Under the approval route, among the categories of ECB covered are: financial institutions dealing exclusively with infrastructure or export finance; banks and FIs which had participated in the textile or steel sector restructuring package approved by the Government and based on assessment of prudential norms by RBI; and cases falling outside the purview of the automatic route.

The ceilings set on spreads have been revised with just two slabs fixed at 200 basis points and 350 basis points over six months LIBOR (London Inter Bank Offer Rate) for ECB of minimum average maturity of three to five years and more than five years, respectively.

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