RBI revises oversees borrowing limits for India Inc

New Delhi: Aiming to encourage the flow of foreign funds into India, the country`s central bank on Monday revised a major guideline which administered the oversees borrowing limits for India Inc.

The Reserve Bank of India (RBI) said that it has revised the framework governing the external commercial borrowing (ECB) facility for the Indian industry.

It said that the revised framework has been drafted considering the current macro-economic developments and the experience gained over the last 10 years.

The RBI elaborated that the new framework takes a more liberal approach towards ECB, with fewer restrictions on end uses and higher all-in-cost ceiling.

Similarly, the new norms, take a more liberal approach for Indian rupee (INR) denominated ECBs, where the currency risk is borne by the lender.

Furthermore, the list of overseas lenders have been expanded to include long term lenders like sovereign wealth funds, pension funds and insurance companies.

However, the RBI has maintained a small negative list of end-use requirements applicable to long-term ECBs and INR denominated ECBs.

Other major features of the new policy include, raising of limit for small value ECBs with minimum average maturity (MAM) of 3 years to $50 million from the existing $20 million.

The Indian apex bank said that the framework for ECB as a means to attract flow of funds from abroad will continue to be a major tool to calibrate the policy towards capital account management in response to evolving macro-economic situation. 

Commenting on the latest reform measure, Shaktikanta Das, secretary economic affairs, with finance ministry twitted that the government, RBI, SEBI are working together with positive interaction and understanding and will continue to work for reforms and stability.

In addition to the latest reform measure, RBI said that it will review the new ECB guidelines after one year based on the experience and evolving macro-economic situation.

In September 2015, RBI had placed the draft proposal for new ECB framework in the public domain for wider consultation.