The Reserve Bank of India (RBI) has notified some revisions to the external commercial borrowing (ECB) framework thereby allowing infrastructure firms to raise shorter-term ECBs.
The central bank said companies in infrastructure sector, non-banking financial companies-infrastructure finance companies (NBFC-IFCs), NBFCs-asset finance companies (NBFC-AFCs), holding companies and core investment companies (CICs) will also be eligible to raise ECB under Track 1 of the framework with minimum average maturity period of 5 years.
But this will be subject to 100% hedging, the RBI added. A number of firms are believed to have written to the central bank regarding clarfication in terms of the track classification as the earlier ECB framework permitted infrastructure firms to raise funds under track 2 where the minimum average maturity is 10 years. As a result of this, infrastructure firms can now go for shorter-tenure ECB as well.
Exploration, mining and refinery sectors will be deemed as in the infrastructure sector, and can access ECB as applicable to infrastructure sector.
The RBI clarified that NBFCs-IFCs and NBFCs-AFCs will be allowed to raise ECB only for financing infrastructure while holding companies and CICs can use ECB proceeds only for on-lending to infrastructure special purpose vehicles (SPVs).
Companies in infrastructure sector, Holding Companies and CICs will continue to have the facility of raising ECB under Track II of the ECB framework subject to the conditionalities prescribed, the release added.
The companies added under Track I should have a board approved risk management policy and the designated AD Category-I bank should verify that 100% hedging requirement is complied with during the currency of ECB, it said.
The designated AD Category-I banks can allow refinancing of ECBs raised under the previous ECB framework if the refinancing is at a lower all-in-cost and the borrower is eligible to raise ECB under the extant ECB framework with the residual maturity not being reduced.
The minimum average maturity of foreign currency convertible bonds (FCCBs)/ foreign currency exchangeable bonds (FCEBs) would be five years irrespective of the amount of borrowing while the call and put option, if any, for FCCBs will not be exercisable prior to five years, the central bank clarified.
Under Track III, the NBFCs can raise ECBs for on-lending for any activities including infrastructure as permitted by the concerned regulatory department of the central bank.