Frontier India Current Affairs

Written on May 29, 2008 – 7:42 pm | by FICA |

The External Commercial Borrowing (ECB) policy has been modified. At present, borrowers proposing to avail ECB up to USD 20 million for Rupee expenditure for permissible end-uses require prior approval of the Reserve Bank under the Approval Route. It has been decided that, henceforth, borrowers in infrastructure sector may avail ECB up to USD 100 million for Rupee expenditure for permissible end-uses under the Approval Route; in the case of other borrowers, the existing limit of USD 20 million for Rupee expenditure for permissible end-uses under the Approval Route has been enhanced to USD 50 million.

The all-in-cost ceilings in respect of ECB are modified for above LIBOR 6 months. Average Maturity Period from three years and up to five years has been proposed to 200 basis points (bps) from original 150 bps. More than five years is proposed to 350 bps from existing 250 bps. The changes will apply to ECB both under the automatic route and the approval route.

All other aspects of ECB policy such as USD 500 million limit per company per year under the Automatic Route, eligible borrower, recognised lender, end-use of foreign currency expenditure for import of capital goods and overseas investments, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

The amendments in ECB policy will come into force on the date of Notification of Regulations / directions issued by the Reserve Bank in this regard under the Foreign Exchange Management Act, 1999.

At present, FIIs registered with SEBI are permitted to invest in Government Securities and corporate bonds up to USD 3.2 billion and USD 1.5 billion, respectively. It has been decided in consultation with the Reserve Bank to enhance the limits to USD 5 billion and USD 3 billion, respectively. SEBI is being advised to take further action in the matter.