GOVERNMENT REVISES EXTERNAL COMMERCIAL
BORROWINGS POLICY
In the background
of developments in recent months, the Government has revised the
existing External Commercial Borrowings (ECBs) Policy for a temporary
period until further review.
(i) All ECBs
shall be subject to the following revised maximum spreads over
six month LIBOR, for the respective currency in which the loan
is being raised or the applicable benchmark(s), as the case may
be:
Type of projects
Existing New (Basis points)
(all-in
cost) (all-in cost)
Normal Projects-
300 150
Infrastructure-
400 250
Long term-
450 300
(ii) ECBs for
meeting rupee expenditure under automatic route to be hedged unless
there is a natural hedge in the form of uncovered foreign exchange
receivables, which will be ensured by Authorized Dealers (ADs).
(iii) ECBs exceeding
USD 50 million would be permitted for the following end uses only
(a) Financing import of equipment and (b) Foreign exchange needs
of infrastructure projects.
(iv) No financial
intermediary (viz. a bank, DFI, or NBFC) will be either allowed
access to ECBs or to provide guarantees. However, this will not
apply to Textile and Steel restructuring packages which have already
been announced by the Government in consultation with RBI.
(v) ECBs pending
utilization would need to be parked overseas.
The above amendments
to the ECB guidelines will come into force from the date of issue
of notification of regulations/directions.
The Consolidated
Guidelines on Policies and Procedures for External Commercial
Borrowings were issued by the Government in July, 1999 and amendments
to the said Guidelines were issued on February 9, 2000, June 14,
2000, September 1, 2000, July 3, 2002 and September 15, 2002.
