What changed
Previously, repayment of rupee loans was not a permissible end-use for ECB. Now, infrastructure companies can refinance up to 25% of fresh ECB proceeds towards rupee loans for completed infrastructure projects, subject to conditions like 75% allocation to new project capital expenditure and lender certification.
What it means for you
This gives infrastructure firms a new avenue to reduce domestic debt costs by accessing cheaper foreign funds. Banks will see some rupee loans repaid early, potentially freeing up capital, but must monitor end-use and cannot provide guarantees. The approval route ensures RBI oversight.
What you must do
- Verify that borrower qualifies as 'infrastructure' as per ECB guidelines and that 75% of ECB is for new project capital expenditure.
- Ensure the 25% refinance portion is used only for outstanding rupee loans related to capital expenditure of completed infrastructure projects.
- Collect and verify certifications: project completion details, statutory auditor's confirmation on rupee loan use, and outstanding loan certificate from the domestic lender.
- Monitor end-use of ECB proceeds and ensure no guarantees are provided by Indian banks for these ECBs.
Who it affects
Authorised Dealer Category I banks, Infrastructure companies seeking ECB, Domestic banks with rupee loans to infrastructure firms
Can any company use this ECB facility for refinancing?
No, only Indian companies in the infrastructure sector as defined under ECB guidelines can use this facility, and only under the approval route.
What documentation is needed for the refinancing portion?
Borrowers must submit project completion details certified by the AD bank, statutory auditor certification on rupee loan use for capital expenditure, and certification from the AD bank on outstanding rupee loans.
Are Indian banks allowed to guarantee these ECBs?
No, banks in India are not permitted to provide any form of guarantee for these ECBs.