In an attempt to facilitate access of overseas fund without any hassel, Reserve Bank of India (RBI) liberalized External Commercial Borrowings Policy by adding more sectors in the window. In a late night notification that released yesterday.
It has been decided to increase the ECB Liability to Equity Ratio for ECB raised from direct foreign equity holder under the automatic route to 7:1. This ratio will not be applicable if a total of all ECBs raised by an entity is up to USD 5 million or equivalent.
A uniform all-in-cost ceiling of 450 basis points over the benchmark rate will be stipulated to harmonize the provisions of Foreign Currency and Rupee ECBs and Rupee Denominated Bonds.
Moreover, Housing Finance Companies and port trust are eligible to avail ECB’s under all tracks, provided that they should have a board-approved risk management policy and should keep their ECB exposure hedged 100 percent at all times for ECBs as per the RBI notification.
ECB’s should be avoid putting that money in real estate or purchase of land when used for affordable housing, SEZ development, and construction as a part of the condition for investment. Moreover, it should also restrict ECB fund to be invested in share market and equity investment.
On-lending activities for the activities mentioned will be barred as per the law, the RBI notification said.
It has also been decided that the benchmark rate will be set 6 months USD LIBOR for Track I and Track II while it will be the prevailing yield of the Government of India securities of the corresponding maturity for Track III (Rupee ECBs) and RDBs.