What changed
The temporary increase in all-in-cost ceiling for ECBs with average maturity of 3 to 5 years, set at Libor + 350 bps from November 23, 2011, was due for review on March 31, 2012. RBI has now decided to continue this enhanced ceiling for a further six months, i.e., up to September 30, 2012. The ceiling for maturities over 5 years remains unchanged at Libor + 500 bps.
What it means for you
Indian borrowers can continue to raise ECBs at slightly higher cost without breaching regulatory limits, reflecting global market conditions. Banks facilitating ECBs can process applications with the same relaxed pricing norms for another six months, reducing compliance friction. This extension provides certainty to corporates planning medium-term foreign borrowing.
What you must do
- Update your internal ECB pricing guidelines to reflect the extended all-in-cost ceiling up to September 30, 2012.
- Advise corporate clients that the enhanced ceiling of Libor + 350 bps for 3-5 year ECBs remains in force.
- Ensure all ECB applications processed before the new review date comply with the current all-in-cost caps.
- Monitor RBI announcements around September 30, 2012 for any further changes.
Who it affects
Category-I Authorised Dealer Banks, Indian corporates raising ECBs, ECB arrangers and advisors
What is the all-in-cost ceiling for ECBs with maturity over 5 years?
For ECBs with average maturity of more than five years, the all-in-cost ceiling remains at 6-month Libor + 500 bps for the respective currency.
Until when is the enhanced ceiling applicable?
The enhanced all-in-cost ceiling is applicable up to September 30, 2012, after which it will be reviewed again.
Does this circular change any other ECB policy aspects?
No, all other aspects of ECB policy remain unchanged as per the circular.