What changed
Power sector companies can now use up to 40% of fresh ECB to refinance domestic rupee loans, provided at least 60% of the ECB is used for new capital expenditure in infrastructure. Additionally, ECB under automatic route is now allowed for capital expenditure on maintenance and operations of toll systems for roads and highways, as long as these activities are part of the original project.
What it means for you
Banks can expect increased ECB inflows for power sector refinancing, reducing their exposure to rupee loans in this segment. The automatic route for toll system maintenance opens a new avenue for infrastructure lending, potentially boosting project viability and reducing credit risk for lenders involved in road and highway projects.
What you must do
- Update internal ECB policy manuals to reflect the new 40% refinancing limit for power sector and automatic route eligibility for toll system maintenance.
- Advise power sector clients on the revised refinancing conditions, ensuring they maintain 60% fresh capital expenditure for infrastructure.
- Review existing road and highway project loans to identify opportunities for ECB-funded maintenance and operations under automatic route.
- Train AD Category-I staff on the immediate effective date and unchanged aspects like all-in-cost and reporting requirements.
Who it affects
AD Category-I banks handling ECB transactions, Power sector companies with domestic rupee loans, Infrastructure firms involved in road and highway toll projects
Can power companies use 100% of fresh ECB for refinancing?
No, only up to 40% of fresh ECB can be used for refinancing rupee loans; at least 60% must go towards new capital expenditure for infrastructure projects.
Is prior RBI approval needed for ECB for toll system maintenance?
No, if the maintenance and operations are part of the original project, ECB for capital expenditure is allowed under the automatic route.
Do other ECB guidelines like all-in-cost and maturity remain the same?
Yes, all other aspects such as maximum limit under automatic route, eligible borrower, average maturity, all-in-cost, prepayment, and reporting remain unchanged.