External Commercial Borrowings Policy -RBI modifies ECB Policy: All-in-cost Ceiling enhanced; ECB raised for Rupee Outlay to be brought in Immediately for credit to Rupee accounts - November 2011

November 23, 2011: On a review of the developments in the global financial markets and current macro-economic conditions, RBI has decided, in consultation with the Government of India, to modify certain aspects of the External Commercial Borrowings (ECB) policy as under:

(i) Enhancement in all-in-cost ceiling

The all-in-cost for ECBs has been revised as under:

Average Maturity Period        All-in-cost over 6 month LIBOR*
                                                Existing                Revised

Three and up to five years                300 bps        350 bps       

More than five years                        500 bps        500 bps       

* for the respective currency of credit or applicable benchmark

(ii) Parking of ECB Proceeds

The proceeds of the ECB raised abroad for Rupee expenditure in India, such as, local sourcing of capital goods, on-lending to Self-Help Groups or for micro credit, payment for spectrum allocation, etc., should be brought immediately for credit to Rupee accounts with AD Category I banks in India. In other words, ECB proceeds meant only for foreign currency expenditure can be retained abroad pending utilisation. As hitherto, however, the Rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.

These amendments in ECB policy will come into force immediately and the enhancement in all-in-cost ceiling is applicable up to March 31, 2012 subject to review thereafter.

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