Reserve Bank modifies ECB policy

The Reserve Bank of India (RBI) on Friday relaxed norms for the External Commercial Borrowing (ECBs) by allowing banks and companies to restructure and reschedule the existing borrowings.

The modification to the ECB policy will come into force with immediate effect.

“The RBI allowed changes / modifications (irrespective of the number of occasions) in the draw-down and repayment schedules of the ECB, whether associated with change in the average maturity period or not and / or with changes (increase/decrease) in the all-in-cost,” RBI said in a notification.

It also allowed reduction in the amount of ECB (irrespective of the number of occasions) along with any changes in draw-down and repayment schedules, average maturity period and all-in-cost.

The central bank also allowed banks to increase in all-in-cost of ECB, irrespective of the number of occasions.

However, RBI said that revised average maturity period and / or all-in-cost is / are in conformity with the applicable ceilings / guidelines and the changes are effected during the tenure of the ECB.

If the lender is an overseas branch / subsidiary of an Indian bank, the changes shall be subject to the applicable prudential norms, it added.

It has also been decided to delegate powers to the banks to permit changes in the name of the lender of ECB after satisfying themselves with the bonafides of the transactions and ensuring that the ECB continues to be in compliance with applicable guidelines.

Further, banks were also allowed the cases requiring transfer of the ECB from one company to another on account of re-organisation at the borrower’s level in the form of merger / demerger / amalgamation / acquisition as per the applicable laws / rules after satisfying themselves that the company acquiring the ECB is an eligible borrower and ECB continues to be in compliance with applicable guidelines.

However, the easing of rules will not be applicable for Foreign Currency Convertible Bonds (FCCBs), the RBI said.