The Hindu Business Line : RBI modifies ECB norms

Under the new norms, ECBs with minimum average maturity of five years by non-banking financial companies (NBFCs) from multilateral financial institutions, reputable regional financial institutions, official export credit agencies and international banks to finance import of infrastructure equipment for leasing to infrastructure projects would be considered by the RBI under the Approval Route.

Foreign Currency Convertible Bonds by housing finance companies satisfying specific criteria would also be considered under this route.

Prepayment of ECBs up to $ 200 million (as against the existing limit up to $ 100 million) may be allowed by authorised dealers without prior approval of the RBI subject to compliance of applicable minimum average maturity period for the loan. Pre-payment of ECBs for amounts exceeding $ 200 million would be considered by the RBI under the Approval Route.

Currently, domestic rupee denominated structured obligations are permitted by the Government to be credit enhanced by international banks/international financial institutions/joint venture partners. Such applications would henceforth be considered by the RBI under the Approval Route.

RBI has issued these norms after considering the concerns raised by the policy allowing NGOs to raise ECBs.

According the RBI, the concerns emanating from ECB for NGOs engaged in micro finance activities can be categorised in to four types: Whether the borrower is genuine. (ii) whether ECB funds are utilised for genuine purpose, (iii) credentials of the overseas lender of ECB and (iv) systemic implications of such ECB flows including the risks of foreign currency borrowing by such entities. The following framework addresses these issues. policy as indicated below, RBI said in a notification issued today.

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