RBI relaxes norms to raise funds for infrastructure

The bank after consulting the government and keeping in mind the existing overseas funding sources, has reassessed the guidelines of the ECB. This has been done keeping in mind the need for long term lending for infrastructure projects in the country

The Dollar Business Bureau

To aid the overseas companies in raising money for infrastructure projects within the country, the Reserve Bank of India has relaxed the norms for borrowing these funds.

The bank after consulting the government and keeping in mind the existing overseas funding sources, has reassessed the guidelines of the ECB (External Commercial Borrowing). This has been done keeping in mind the need for long term lending for infrastructure projects in the country.

Firms in the infrastructure sector that qualify for ECB are, NBFCs-Asset Finance Companies (NBFC-AFCs), Core Investment, Non-Banking Financial Companies -Infrastructure Finance Companies (NBFC-IFCs), Companies (CICs) and Holding Companies. These firms qualify to the ECB having a maturity period of 5 years. However, these would be subjected to 100% hedging.

The RBI also clarified that, “'Exploration, Mining and Refinery' sectors which are not included in the list of infrastructure sectors but were eligible to take ECB will be deemed as belonging to the infrastructure sector, and can access ECB as applicable to infrastructure sector.”

ECB proceeds can only be used by CIC’s and Holding companies, if they are on-lending it to Special Purpose Vehicles(SPV’s).

RBI further said that, “Companies in infrastructure sector shall utilize the ECB proceeds raised under Track I for the end uses permitted for this Track. NBFCs-IFCs and NBFCs-AFCs will, however, be allowed to raise ECB only for financing infrastructure.”

Track I pertains to the denominated ECB of Medium Term Foreign Currency having an average maturity period of 3 to 5 years. The borrowing limit using the automatic route for each firm has been fixed at $750 million.

However, the NBFC’s which fall under the regulatory scope of the RBI would be allowed to raise under ECB.
  

March 31, 2016 | 03:40pm IST

The Dollar Business Bureau - Mar 31, 2016 12:00 IST
 
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