RBI opens ECB gates for telcos; tightens policy
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Last Updated: Thursday, December 10, 2009, 00:27
  
Mumbai: The Reserve Bank on Wednesday changed the guidelines for external commercial borrowings (ECBs) for telecom companies by allowing them to use the fund raised abroad to participate in 3G spectrum auction but tightened the norms by discontinuing with the facility for FCCBs buyback.

Ahead of the 3G spectrum auction, scheduled for January 14, the central bank in a notification allowed telcos to use ECB funds for buying airwaves.

Accessing the ECB route to raise money to participate in 3G spectrum auction has been the long-standing demand of telcom companies. They need mammoth funds to take part in the auction as the reserve price is fixed at Rs 3,500 crore.

With today's tweaking in the norms, the all-inclusive ceiling for ECBs under the approval route will be 300 basis points above London interbank offered rate-- the benchmark for global borrowings and lendings-- for loans ranging from three to five years.

The all-inclusive ceiling would be 500 basis points for loans with a maturity of more than five years.

Earlier, RBI has removed the ceilings for companies to raise funds when there was a global credit crunch.

Significantly, it decided to discontinue with the facility for buyback of foreign currency convertible bonds (FCCBs) by Indian companies with effect from January 1, 2010.

"Keeping in view the prevailing macroeconomic conditions and global developments, especially the improvements in the stock prices, it has been decided to discontinue the facility with effect from January 1, 2010", the notification said.

The RBI said the new ECB norms for telecom sector will apply with immediate effect.

The central bank also extended the time real estate sector for raising overseas funds for developing integrated townships under the approval route. Now, the facility is extended to December 31 2010.

NBFCs, exclusively involved in financing the infrastructure projects, have been allowed to avail of ECBs from the recognised lender category including international banks under the approval route, with immediate effect.

PTI


First Published: Thursday, December 10, 2009, 00:27


Tag: RBIECB telcospolicy
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