What changed
RBI allowed successful 2G bidders to refinance rupee loans taken from domestic lenders with long-term ECB under automatic route, provided ECB is raised within 18 months of loan sanction. It also permitted bridge finance via short-term foreign currency loans, replaceable with long-term ECB within 18 months. Additionally, the ECB liability-equity ratio was waived for loans from ultimate parent companies holding at least 25% paid-up equity in the borrower.
What it means for you
Banks can now facilitate ECB for 2G bidders more easily, as the automatic route reduces approval delays. The refinancing option allows bidders to replace costly rupee debt with cheaper foreign funds, improving their cash flows. However, AD banks must verify end-use and ensure payment evidence to the government. The relaxations are limited to 2G auction winners and do not affect other ECB norms.
What you must do
- Verify that the borrower is a successful 2G auction bidder and has provided DoT receipt/challan for upfront payment.
- Ensure any refinancing of rupee loans or bridge finance is replaced with long-term ECB within 18 months.
- Monitor end-use of funds for ECB raised under this special dispensation.
- Check that the lender (ultimate parent) holds at least 25% paid-up equity in the borrower for liability-equity ratio waiver.
- Report all ECB transactions as per existing guidelines, noting the special dispensation.
Who it affects
Category-I Authorised Dealer banks, Telecom companies bidding in 2G spectrum auction, Domestic lenders providing rupee loans for spectrum payment
Can any telecom company use these ECB relaxations?
No, these relaxations are a special dispensation only for successful bidders in the upcoming 2G spectrum auction. Other telecom companies must follow standard ECB rules.
What is the time limit for refinancing rupee loans with ECB?
The long-term ECB must be raised within 18 months from the date of sanction of the rupee loan by the domestic lender.
Does the liability-equity ratio waiver apply to all ECB lenders?
No, it applies only when the ECB is from the borrower's ultimate parent company, and that parent holds at least 25% paid-up equity in the borrower, directly or indirectly.