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External Commercial Borrowings (ECB) by Holding Companies/Core Investment Companies for the project use in Special Purpose Vehicles (SPVs)
This circular permit Holding Companies/Core Investment Companies (CIC) to raise ECB under the automatic route/approval route, as the case may be, for project use in SPV subject to the following terms and conditions:
i. The business activity of the SPV should be in the infrastructure sector as defined in the extant ECB guidelines.
ii. The infrastructure project must be implemented by the SPV established exclusively for implementing the project.
iii. ECB proceeds must be utilized either for fresh capital expenditure or for refinancing of existing Rupee loans (under the approval route) availed of from the domestic banking system for capital expenditure.
iv. ECB for SPV can be raised for up to 3 years after the Commercial Operations Date of the SPV.
v. The SPV has to give an undertaking that no other method of funding, such as, trade credit (if for import of capital goods), etc. will be used for the portion of fresh capital expenditure that is financed through ECB.
vi. ECB proceeds must be kept in a separate escrow account pending utilization for permissible end-uses and use of such proceeds must be strictly monitored by the bank for permissible uses.
vii. Holding Companies that come under the Core Investment Company (CIC) regulatory framework have to comply with the following additional terms and conditions: –
a) ECB availed is within the ceiling of leverage stipulated for CIC, i.e., their outside liabilities including ECB must not be more than 2.5 times of their adjusted net worth as on the date of the last audited balance sheet; and
b) In case of CIC with asset size below Rs. 100 crore, ECB availed of must be on fully hedged basis.
