RBI extends window for External Commercial Borrowings (ECB) for Civil Aviation Sector

The Reserve Bank of India (RBI) has permitted airlines in India to raise money from abroad to March 2015, against the earlier deadline of December 2013. In a notification on its website, RBI said airlines can raise money through external commercial borrowings (ECBs) till March 2015 for their working capital requirements. This is the second such extension of the scheme. It was announced in the budget for 2012-13 and later extended to December 2013.

External Commercial Borrowings (ECB) for Civil Aviation Sector is subject to the following conditions:

Airline companies registered under the Companies Act, 1956 and possessing scheduled operator permit license from DGCA for passenger transportation are eligible to avail of ECB for working capital;

ECB will be allowed to the airline companies based on the cash flow, foreign exchange earnings and its capability to service the debt;

The ECB for working capital should be raised within 12 months from the date of issue of the circular;

The ECB can be raised with a minimum average maturity period of three years; and

The overall ECB ceiling for the entire civil aviation sector would be USD one billion and the maximum permissible ECB that can be availed by an individual airline company will be USD 300 million. This limit can be utilized for working capital as well as refinancing of the outstanding working capital Rupee loan(s) availed of from the domestic banking system. Airline companies desirous of availing of such ECBs for refinancing their working capital Rupee loans may submit the necessary certification from the domestic lender/s regarding the outstanding Rupee loan/s.

ECB availed for working capital/refinancing of working capital as above will not be allowed to be rolled over.

External Commercial Borrowings (ECBs) include bank loans, suppliers' and buyers' credits, fixed and floating rate bonds (without convertibility) and borrowings from private sector windows of multilateral Financial Institutions such as International Finance Corporation. Euro-issues include Euro-convertible bonds and GDRs. Special Section on External Commercial Borrowings with ECB Guidelines since 1999.... click Here