Mumbai: The Reserve Bank of India has issued the revised External Commercial Borrowings guidelines, rationalised limits, relaxed maturity norms and removed cost caps.
Under the new norms, eligible borrowers can now raise ECBs up to the higher of $1 billion in outstanding borrowings or 300% of net worth based on the latest audited standalone balance sheet. The earlier borrowing cap was $750 million. The changes come at a time when India’s ECB volumes have been going up over the past few years. Indian companies had raised a record $61 billion through ECB route in FY25 up from $48 billion raised in FY24.
RBI has said that non-fund based facilities and mandatorily convertible equity instruments will be excluded from the borrowing cap calculation.
The central bank has said that the funds will have a minimum average maturity period of three years. It has allowed manufacturers to raise up to $150 million with maturities between one and three years.
The pricing norms will be aligned more closely with market benchmarks. ECBs with maturities below three years will follow cost ceilings prescribed for trade credits. For fixed-rate loans, the all-in-cost ceiling will factor in floating benchmarks plus applicable swap spreads.
ECB proceeds meant for rupee expenditure must be parked in an INR account within one month, with surplus funds deployable in unencumbered fixed deposits for up to a year. Funds intended for foreign currency expenditure can be retained in domestic or overseas foreign currency accounts and invested in short-term debt instruments with original maturity of up to one year.
There are restriction on end-use of borrowed funds to be used for the purposes of chit funds, Nidhi company, reat estate business and construction of farmhouse, agricultural and animal husbandry.
