What changed
RBI has reviewed the ECB policy for infrastructure sector and now permits Indian infrastructure companies to avail short-term credit (bridge finance) for importing capital goods, under the approval route. The bridge finance must be replaced with a long-term ECB that complies with all extant ECB norms, and prior RBI approval is required for that replacement.
What it means for you
Banks can now facilitate short-term bridge finance for infrastructure clients importing capital goods, but must ensure the bridge loan is eventually replaced by a compliant long-term ECB. Banks cannot provide any guarantees for these transactions and must strictly monitor end-use and verify import documentation. This gives infrastructure firms more flexibility in funding imports while maintaining ECB discipline.
What you must do
- Advise infrastructure clients that they can avail short-term bridge finance for capital goods imports under approval route, subject to replacement with long-term ECB.
- Ensure prior RBI approval is obtained before replacing bridge finance with long-term ECB.
- Monitor end-use of funds and verify import of capital goods via Bill of Entry; do not provide any guarantees.
- Comply with all other ECB norms (eligible borrower, lender, all-in-cost, average maturity, reporting) unchanged.
Who it affects
Authorised Dealer Category I banks, Infrastructure sector companies importing capital goods, Borrowers and lenders involved in ECB transactions
What is bridge finance in this context?
It is short-term credit (including buyers'/suppliers' credit) availed by infrastructure companies to import capital goods, which must later be replaced by a long-term ECB.
Can banks provide guarantees for such bridge finance?
No, banks in India are not permitted to provide any form of guarantees for these transactions.
What documentation is needed to evidence import?
The designated AD Category I bank must verify the Bill of Entry to evidence the import of capital goods.