EXTERNAL COMMERCIAL BORROWING

Reserve Bank of India (RBI) has relaxed External Commercial Borrowing norms for corporates, non-banking lenders as a move towards easing liquidity.

• The Reserve Bank of India (RBI) has liberalised the end-use stipulations for the External Commercial Borrowings both for corporates as well as liquidity starved non-banking lenders.
• Liberalisation will be applicable to ECBs taken for working capital, general corporate purpose loans or repayment of rupee loans.
• Corporate borrowers will be able to avail of ECBs to repay rupee loans taken for Capital expenditures if they are into manufacturing or infrastructure building and classified as Special Mention Account, SMA-2 or Non-Performing Asset, under any one-time settlement arrangement with lenders.

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External Commercial Borrowing(ECB) 

• An external commercial borrowing (ECB) is an instrument used in India to facilitate Indian companies to raise money outside the country in foreign currency.
• It refers to commercial loans which can be in the form of bank loans, bonds, securitized instruments, buyers’ credit and suppliers credit availed from non-resident lenders with a minimum average maturity of 3 years.
• ECBs availed of by residents are governed by the Foreign Exchange Management Act, 1999 alongwith the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, as amended from time to time.

Source: The Hindu