What changed
Earlier, ECB was permitted only for the first stage acquisition and the mandatory second stage offer to the public in PSU disinvestment. This circular extends the facility to all subsequent stages of acquisition, making ECB available for multiple rounds of disinvestment.
What it means for you
Banks can now process ECB proposals for any round of PSU share disinvestment, providing more flexibility for borrowers. This may increase demand for ECB as a funding source for PSU stake purchases, requiring banks to assess compliance with overall ECB guidelines.
What you must do
- Update internal ECB policy to reflect that proceeds can be used for all stages of PSU disinvestment.
- Advise customers that ECB is now available for multiple rounds of PSU share acquisition.
- Ensure all ECB applications under this facility comply with extant ECB guidelines and FEMA provisions.
- Monitor end-use declarations to confirm funds are used only for permitted disinvestment stages.
Who it affects
AD Category-I banks handling ECB transactions, Corporate borrowers investing in PSU disinvestment, Government entities managing PSU disinvestment programmes
Does this circular allow ECB for all rounds of PSU disinvestment?
Yes, RBI clarifies that ECB is permitted for all subsequent stages of share acquisition under the government's PSU disinvestment programme, not just the first stage and mandatory second offer.
What should banks do to implement this change?
Banks should update their internal policies, inform customers about the expanded scope, and ensure all ECB applications comply with existing FEMA and ECB guidelines.