What changed
Previously, all borrowers needed prior RBI approval for ECB up to USD 20 million for rupee expenditure. Now, infrastructure sector borrowers can avail up to USD 100 million, and other borrowers up to USD 50 million under the Approval Route. Additionally, all-in-cost ceilings have been revised: for 3-5 year maturity, from 150 bps to 200 bps over LIBOR; for over 5 years, from 250 bps to 350 bps over LIBOR.
What it means for you
Banks can now facilitate larger ECB for rupee expenditure, especially for infrastructure projects, reducing the need for frequent approvals. The higher cost ceilings give borrowers more flexibility to negotiate terms with foreign lenders, potentially increasing ECB inflows. However, the USD 500 million automatic route limit per company per year remains unchanged, so overall exposure caps stay intact.
What you must do
- Update internal ECB processing guidelines to reflect the new USD 100 million limit for infrastructure and USD 50 million for other borrowers under the Approval Route.
- Inform corporate clients about the revised all-in-cost ceilings (200 bps for 3-5 years, 350 bps for over 5 years) to help them structure better deals.
- Ensure compliance with unchanged aspects like the USD 500 million automatic route cap, eligible borrowers, and end-use norms.
- Advise customers to submit applications under the Approval Route for rupee expenditure ECB exceeding the enhanced limits.
Who it affects
Authorised Dealer Category-I banks, Infrastructure sector borrowers, Other corporate borrowers seeking ECB for rupee expenditure, Foreign lenders and investors in Indian debt
Does this circular change the automatic route limit for ECB?
No, the USD 500 million limit per company per year under the Automatic Route remains unchanged. Only the Approval Route limits for rupee expenditure have been enhanced.
Are the revised all-in-cost ceilings applicable to both automatic and approval routes?
Yes, the circular states that the changes in all-in-cost ceilings apply to ECB under both the automatic route and the approval route.
What end-uses are still permissible for ECB under these new limits?
The circular does not change existing end-use norms. Permissible end-uses for rupee expenditure remain as per earlier ECB policy, including for infrastructure projects and other approved purposes.