ECB policy further liberalised

By Our Special Correspondent

NEW DELHI, JUNE 14. As a further liberalisation measure, the Government has decided to place fresh external commercial borrowing (ECB) approvals up to $50 million and all refinancing of existing ECBs under the automatic route.

Also, the powers of the Reserve Bank of India are being enhanced to give clearance to ECBs up to $100 million under all windows of the RBI. At present, the RBI is empowered to grant ECB approvals under the ``$5 million scheme'' and to approve ECBs up to $10 million under all other windows.

Similarly, in case of prepayments, it has been decided that henceforth the RBI would give all such approvals, as per prevailing guidelines on prepayment, even in cases where ECBs have been approved earlier by the Finance Ministry. So far, prepayment approvals were being given by the Ministry or the RBI, depending on who had given the initial ECB approval.

The Ministry has also given out a list of sectors which would be considered as ``infrastructure sectors'' for ECB approvals.

As per the guidelines issued in February this year, the maximum limit of ECB for financing equity investment in a subsidiary or joint venture company implementing infrastructure projects was enhanced from $50 million to $200 million.

Similarly, ECB exposure for all infrastructure projects was enhanced to 50 per cent of the project cost as appraised by a recognised financial institution or bank. It was also announced that exposure beyond 50 per cent of the project cost could be considered in case of power projects and other infrastructure projects on merits of each case.

Consequently, the Ministry has now said that infrastructure sectors would include power, telecommunications, railways, roads including bridges, ports, industrial parks and urban infrastructure such as water supply, sanitation and sewage projects.

The Ministry has also clarified that existing ``all-in-cost ceilings'' for normal projects, infrastructure projects and for long term ECBs would be 300, 400 and 450 basis points over six months LIBOR for the respective currency in which the loan is being raised or applicable bench marks as the case may be.

Also, the average maturity of ECBs for the purpose of ECB guidelines will be the weighted average of all disbursements taking each disbursement individually and its period of retention by the borrower.

Another measure pertains to non-banking finance companies (NBFCs).

At present, corporates can avail themselves of the facilities under the credit enhancement scheme as per conditions set in the ECB guidelines.

Now, NBFCs would also be eligible to avail of this facility on compliance with certain conditions such as the NBFC being registered with the RBI; the company should have earned profits during the last three years and should have secured ``AA'' or equivalent rating from a reputed credit rating agency.

However, in the case of NBFCs where a credit enhancement guarantee has been provided by its parent company on `non- recourse and non-repatriable basis,' the condition of three years track record of profit would not be applicable and the credit rating of ``A'' or equivalent' would also be acceptable in such cases.

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Section  : Business
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