What changed
Previously, NBFCs could only access ECB under approval route from specific lenders for infrastructure equipment leasing. Now, NBFC-AFCs meeting prescribed norms can raise ECB under automatic route from all recognized lenders, with a cap of 75% of owned funds or USD 200 million per year. ECBs above this threshold still require RBI approval.
What it means for you
This opens a cheaper, automatic funding channel for NBFC-AFCs to finance infrastructure equipment imports, reducing reliance on costlier domestic borrowing. Banks acting as AD Category-I must ensure clients comply with hedging and end-use conditions, and monitor the 75% owned funds limit to avoid approval route triggers.
What you must do
- Update internal ECB policy to include NBFC-AFCs under automatic route for infrastructure equipment leasing.
- Verify NBFC-AFC status and compliance with DNBS circular norms before processing ECB applications.
- Ensure full currency hedging is in place for all such ECBs and document it.
- Track aggregate ECB availed by each NBFC-AFC to ensure it stays within 75% of owned funds or USD 200 million per year.
- Advise clients that ECBs exceeding the automatic route cap require prior RBI approval.
Who it affects
NBFC-Asset Finance Companies (AFCs), AD Category-I banks processing ECB applications, Infrastructure equipment importers and lessors
Can NBFC-AFCs raise ECB from any lender under this circular?
Yes, under automatic route, they can raise from all recognized lenders as per extant ECB guidelines, with a minimum average maturity of five years.
What is the maximum ECB amount allowed under automatic route for NBFC-AFCs?
Up to 75% of owned funds of the NBFC-AFC, subject to a cap of USD 200 million or equivalent per financial year.
Is hedging mandatory for these ECBs?
Yes, the currency risk of such ECBs must be fully hedged.