RBI notified Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 on 17th December, 2018 in an attempt to rationalise regulations governing all types of borrowing and lending transactions between a person resident in India and a person resident outside India. In line with the newly notified regulation, RBI has released new External Commercial Borrowings (ECB) Policy on 16th January, 2019.
Major liberalisation/rationalisation in the new framework are:
- Tracks I and II under the existing framework are merged as “Foreign Currency denominated ECB” and Track III and Rupee Denominated Bonds framework are combined as “Rupee Denominated ECB” to replace the current four-tiered structure.
- The list of eligible borrowers has been expanded to include all entities eligible to receive foreign direct investment under the ECB framework.
- Any entity who is a resident of a country which is FATF (Financial Action Task Force) or IOSCO (International Organization of Securities Commission) compliant will be treated as a recognised lender. This change increases the lending options and allows various new lenders.
- The minimum average maturity period (MAMP) has been kept at 3 years for all ECBs, irrespective of the amount of borrowing in lieu of various layers of MAMPs as at present, except the borrowers specifically permitted in the circular to borrow for a shorter period.
- All eligible borrowers can now raise ECBs up to USD 750 million or equivalent per financial year under the automatic route replacing the existing sector wise limits.
- Introduction of late submission fee: Any borrower, who is otherwise in compliance of ECB guidelines, can regularize the delay in reporting by payment of fee.
Click here for the notification.
