External Commercial Borrowings (ECB) – Revised framework
This circular makes the following changes: –
1. ECB framework
i. Companies in infrastructure sector, Non-Banking Financial Companies -Infrastructure Finance Companies (NBFC-IFC), NBFC-Asset Finance Companies (NBFC-AFC), Holding Companies and Core Investment Companies (CICs) are also eligible to raise ECB under Track I of the framework with minimum average maturity period of 5 years, subject to 100% hedging.
ii. For the purpose of ECB, “Exploration, Mining and Refinery” sectors that are not presently included in the Harmonized list of infrastructure sector but which were eligible to take ECB under the previous ECB framework (c.f. A.P. (DIR Series) Circular No. 48 dated September 18, 2013) will be deemed to be in the infrastructure sector, and can access ECB as applicable to infrastructure sector under (i) above.
iii. Companies in the infrastructure sector must utilize the ECB proceeds raised under Track I for the end uses permitted for that Track. NBFC-IFC and NBFC-AFC are, however, allowed to raise ECB only for financing infrastructure.
iv. Holding Companies and CIC must use ECB proceeds only for on-lending to infrastructure Special Purpose Vehicles (SPV).
v. Individual limit of borrowing under the automatic route for aforesaid companies will be as applicable to the companies in the infrastructure sector (currently USD 750 million).
vi. Companies in infrastructure sector, Holding Companies and CIC will continue to have the facility of raising ECB under Track II of the ECB framework subject to the conditions prescribed therefore.
Companies added under Track I must have a Board approved risk management policy. Further, the bank has to verify that 100% hedging requirement is complied with during the currency of ECB and report the position to RBI through ECB 2 returns.
2. Clarification on Circular dated November 30, 2015
i. Banks can, under the powers delegated to them, allow refinancing of ECB raised under the previous ECB framework, provided the refinancing is at lower all-incost, the borrower is eligible to raise ECB under the extant ECB framework and residual maturity is not reduced (i.e. it is either maintained or elongated).
ii. ECB framework is not applicable in respect of the investment in Non-Convertible Debentures (NCD) in India made by Registered Foreign Portfolio Investors (RFPI).
iii. Minimum average maturity of Foreign Currency Convertible Bonds (FCCB) / Foreign Currency Exchangeable Bonds (FCEB) must be 5 years irrespective of the amount of borrowing. Further, the call and put option, if any, for FCCB must not be exercisable prior to 5 years.
iv. Only those NBFC which are coming under the regulatory purview of the Reserve Bank can raise ECB. Further, under Track III, the NBFC can raise ECB for on-lending for any activities including infrastructure as permitted by the concerned regulatory department of RBI.
v. The provisions regarding delegation of powers to banks are not applicable to FCCB / FCEB.
vi. In the forms of ECB, the term “Bank loans” shall be read as “loans” as foreign equity holders / institutions other than banks, also provide ECB as recognised lenders.
