(i) Credit enhancement
will be permitted to be provided by multilateral/regional financial
institutions and Government-owned development financial institutions;
(ii) The underlying debt
instrument should have a minimum average maturity of seven years;
(iii) Prepayment and
call/put options would not be permissible for such capital market
instruments up to an average maturity period of 7 years;
(iv) Guarantee fee and
other costs in connection with credit enhancement will be restricted to a
maximum 2% of the principal amount involved;
(v) On invocation of the
credit enhancement, if the guarantor meets the liability and if the same is
permissible to be repaid in foreign currency to the eligible non-resident
entity, the all-in-cost ceilings, as applicable to the relevant maturity
period of the Trade Credit/ECBs, would apply to the novated loan. Presently,
the all-in-cost ceilings, depending on the average maturity period, are
applicable as follows :
|
Average
maturity period of the loan on invocation
|
All-in-cost
ceilings over 6 month Libor for the respective currency of borrowing or
applicable benchmark
|
|
Up to three
years
|
200 basis
points
|
|
Three years and up to five years
|
300 basis
points
|
|
More than five years
|
500 basis
points
|
(vi) In case of default
and if the loan is serviced in Indian Rupees, the applicable rate of
interest would be the coupon of the bonds or 250 bps over the prevailing
secondary market yield of 5 years Government of India security, as on the
date of novation, whichever is higher;
(vii) IFCs proposing to
avail of the credit enhancement facility should comply with the eligibility
criteria and prudential norms laid down in the Circular DNBS.PD.CC No.
168/03.02.089/ 2009-10, dated February 12, 2010 and in case the novated loan
is designated in foreign currency, the IFC should hedge the entire foreign
currency exposure; and
(viii) The reporting
arrangements as applicable to the ECBs would be applicable to the novated
loans.
