Home › Circulars › RBI/2009-10/252

RBI Tightens ECB Norms: Cost Ceilings, FCCB Buyback, NBFC Access Revised

Current · Source: Reserve Bank of India · RBI/2009-10/252 · issued 09 Dec 2009 · ~2 min read
Quick answerRBI withdraws all-in-cost ceiling relaxations for ECB under approval route from Jan 1, 2010, sets new spreads. FCCB buyback facility ends Dec 31, 2009. NBFCs financing infrastructure can now borrow from international banks under approval route with hedging.
The rule, in the simplest words
How it plays out — a real example

A forex & trade-finance officer in Indore, working for an AD Category-I bank, must now advise clients to review their ECB loan agreements to ensure they comply with the new all-in-cost ceilings, and also help NBFC clients in infrastructure to apply for ECB from international banks with full hedging, all while ensuring compliance with RBI prudential norms. This change affects how the officer structures loan agreements and advises clients on their refinancing options. The officer must update internal systems and training to reflect the revised ECB policy effective January 1, 2010.

What changed

The all-in-cost ceiling relaxation under the approval route, which was in place until December 31, 2009, is withdrawn. From January 1, 2010, new ceilings apply: 300 bps over 6-month Libor for 3-5 year maturity, and 500 bps for over 5 years. The facility for buyback of FCCBs is discontinued from January 1, 2010. NBFCs exclusively financing infrastructure can now access ECB from recognized lenders including international banks under approval route, subject to prudential norms and full hedging.

What it means for you

Banks and corporates must prepare for tighter ECB cost conditions from 2010, as the earlier relaxation ends. The FCCB buyback window closes, limiting refinancing options for companies. NBFCs in infrastructure get broader lender access, but must ensure full currency hedging and compliance with RBI prudential norms, which AD Category-I banks must certify.

What you must do

Who it affects

AD Category-I banks, Corporates availing ECB under approval route, NBFCs exclusively financing infrastructure, Companies with outstanding FCCBs

❓ Common questions

What are the new all-in-cost ceilings for ECB under approval route from January 1, 2010?

For loans with average maturity of 3 to 5 years, the ceiling is 300 basis points over six-month Libor. For maturity over 5 years, it is 500 basis points over Libor.

Can NBFCs financing infrastructure now borrow from international banks?

Yes, with immediate effect, such NBFCs can avail ECB from recognized lenders including international banks under approval route, provided they fully hedge currency risk and comply with RBI prudential norms.

Is the FCCB buyback facility still available after December 31, 2009?

No, the facility is discontinued from January 1, 2010. All buybacks must be completed by December 31, 2009.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications Withdrawn with effect from November 16, 2021, February 18, 2022, May 02, 2022, May 13, 2022, May 21, 2024, July 12, 2024 & October 01, 2024 ( 520 kb ) External Commercial Borrowings (ECB) RBI/2009-10/252 A.P. (DIR Series) Circular No.19 December 9, 2009 To All Category - I Authorised Dealer Banks Madam / Sir, External Commercial Borrowings (ECB) Policy Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to the A.P. (DIR Series) Circular No. 46 dated January 2, 2009, A.P. (DIR Series) Circular No. 64 dated April 28, 2009 and A.P. (DIR Series) Circular No. 71 dated June 30, 2009 relating to External Commercial Borrowings (ECB). 2. On a review of the prevailing macroeconomic conditions and developments in international financial markets, it has been decided to modify some aspects of the ECB policy as indicated below: (i) All-in-cost ceilings As per the extant policy, the all-in-cost ceilings have been dispensed with, under the approval route, until December 31, 2009. In view of the improvement in the credit market conditions and narrowing credit spreads in the international markets, it has been decided to withdraw the existing relaxation in the all-in-cost ceilings under the approval route with effect from January 1, 2010. Accordingly, the all-in-cost ceilings under the approval route for the ECBs, where Loan Agreements have been signed on or after January 1, 2010 will be as under: Average Maturity Period All -in-cost Ceilings over six month Libor * Three years and up to five years 300 basis points More than five years 500 basis points *for the respective currency of borrowing or applicable benchmark. Eligible borrowers proposing to avail of ECB after December 31, 2009, where the Loan Agreement has been signed on or before December 31, 2009 and where the all-in-cost exceed the above ceilings, should furnish a copy of the Loan Agreement. Such proposals would continue to be considered under the approval route. (ii) Integrated township As per the extant policy, corporates, engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002, issued by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India are permitted to avail of ECB, under the approval route, until December 31, 2009. On a review of the prevailing conditions, it has been decided to extend the current policy until December 31, 2010, under the approval route. All other terms and conditions, stipulated in the A.P. (DIR Series) Circulars referred to above, remain unchanged. iii) Buyback of the Foreign Currency Convertible Bonds (FCCBs) In terms of A.P. (DIR Series) Circular No. 39 dated December 8, 2008, read with A.P. (DIR Series) Circular No. 58 dated March 13, 2009 and A.P. (DIR Series) Circular No. 65 dated April 28, 2009, Indian companies have been allowed to buyback their Foreign Currency Convertible Bonds (FCCBs) both under the automatic route and approval route until December 31, 2009. Keeping in view the prevailing macroeconomic conditions and global developments, especially the improvements in the stock prices, it has been decided to discontinue the facility with effect from January 1, 2010. iv) ECB for the NBFC Sector As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are exclusively involved in the financing of the infrastructure sector, are permitted to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the approval route. In view of the thrust given to development of infrastructure sector, it has been decided with immediate effect to allow NBFCs exclusively involved in financing the infrastructure projects to avail of ECB from the recognized lender category including international banks under the approval route, subject to complying with the prudential standards prescribed by the Reserve Bank and the borrowing entities fully hedging their currency risk. The AD Category-I bank should certify the compliance with the prudential norms by the borrowing NBFCs. (v) ECB for Spectrum in the Telecommunication Sector As per the extant policy, as indicated in A.P. (DIR Series) Circular No. 26 dated October 22, 2008, payment for obtaining license/permit for 3G Spectrum is considered an eligible end - use for the purpose of ECB under the automatic route. It has now been decided to permit eligible borrowers in the telecommunication sector to avail of ECB for the purpose of payment for Spectrum allocation. This modification will come into effect with immediate effect. 3. All other aspects of ECB policy such as USD 500 million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB, reporting arrangements and terms and conditions stipulated in the A.P. (DIR Series) Circulars shall remain unchanged. 4. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 5. The directions contained in this circular have been issued under sections 10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, (Salim Gangadharan) Chief General Manager-in-Charge 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/252 · issued 09 Dec 2009. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • For NBFC clients in infrastructure, facilitate ECB applications under approval route from international banks, ensuring full hedging and prudential compliance.
  • Update internal systems and training to reflect the revised ECB policy effective January 1, 2010.
📜 Compliance
  • Review all ECB loan agreements signed after Dec 31, 2009 to ensure all-in-cost stays within new ceilings (300 bps for 3-5 yrs, 500 bps for >5 yrs over Libor).
  • Advise clients planning FCCB buybacks to complete transactions before December 31, 2009.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, Corporates availing ECB under approval route, NBFCs exclusively financing infrastructure, Companies with outstanding FCCBs), your first concrete step on “RBI Tightens ECB Norms: Cost Ceilings, FCCB Buyback, NBFC Access Revised” is: “Review all ECB loan agreements signed after Dec 31, 2009 to ensure all-in-cost stays within new ceilings (300 bps for 3-5 yrs, 500 bps for >5 yrs over Libor).” (RBI issued this 09 Dec 2009).

  1. Circular: RBI/2009-10/252 -- RBI Tightens ECB Norms: Cost Ceilings, FCCB Buyback, NBFC Access Revised
  2. Issued: 09 Dec 2009
  3. Action required: Review all ECB loan agreements signed after Dec 31, 2009 to ensure all-in-cost stays within new ceilings (300 bps for 3-5 yrs, 500 bps for >5 yrs over Libor).
  4. Action required: Advise clients planning FCCB buybacks to complete transactions before December 31, 2009.
  5. Action required: For NBFC clients in infrastructure, facilitate ECB applications under approval route from international banks, ensuring full hedging and prudential compliance.
  6. Action required: Update internal systems and training to reflect the revised ECB policy effective January 1, 2010.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5410&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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