What changed
Earlier, all NBFCs exclusively financing infrastructure could avail ECB under approval route for on-lending. Now, only IFCs (a newly defined sub-category of NBFCs) are eligible for this facility, and the general NBFC dispensation has been withdrawn. IFCs must comply with the February 12, 2010 DNBS circular, hedge currency risk fully, and keep total ECB outstanding within 50% of owned funds.
What it means for you
Banks must now verify that any NBFC client seeking ECB for infrastructure on-lending is classified as an IFC by RBI and meets the new conditions. The 50% owned funds cap and full hedging requirement reduce credit and currency risk for lenders. Existing ECB policy limits (e.g., $500 million per company per year under automatic route) remain unchanged.
What you must do
- Update internal ECB eligibility checklists to require IFC classification for infrastructure on-lending proposals.
- Ensure AD Category-I banks certify compliance with IFC norms, full hedging, and 50% owned funds cap before approving ECB.
- Communicate the revised ECB framework to NBFC clients, especially those previously relying on the general infrastructure NBFC route.
- Monitor outstanding ECB of IFC clients against their owned funds to ensure the 50% limit is not breached.
Who it affects
AD Category-I banks, Infrastructure Finance Companies (IFCs), NBFCs financing infrastructure, Borrowers in the infrastructure sector
Can a non-IFC NBFC still raise ECB for infrastructure on-lending?
No. The earlier dispensation for all NBFCs exclusively financing infrastructure has been withdrawn. Only IFCs classified as such by RBI are eligible under the approval route for on-lending to infrastructure.
What are the key conditions for IFCs to raise ECB?
IFCs must comply with the DNBS circular dated February 12, 2010, fully hedge currency risk, and ensure total outstanding ECB (including the proposed one) does not exceed 50% of their owned funds.
Does this circular change the automatic route limit of $500 million per company per year?
No. All other ECB policy aspects, including the $500 million automatic route limit, eligible borrowers, recognised lenders, end-use, and maturity norms, remain unchanged.