RBI revises ECB/TC all-in-cost norms for LIBOR transition
Current · Source: Reserve Bank of India · RBI/2021-22/135 · issued 08 Dec 2021 · ~2 min read
Quick answerRBI has updated the all-in-cost benchmark and ceiling for foreign currency ECBs and TCs to replace LIBOR with any widely accepted interbank rate or alternative reference rate (ARR). The ceiling is increased by 50 bps for new borrowings and 100 bps for existing ones transitioning from LIBOR.
The rule, in the simplest words
Banks must update loan documentation to use alternative reference rates (ARRs) instead of LIBOR for foreign currency ECBs and TCs.
The all-in-cost ceiling for new foreign currency ECBs and TCs is 500 bps over the benchmark rate, and for existing ones transitioning from LIBOR, it's 550 bps.
The all-in-cost ceiling for new foreign currency TCs is 300 bps over the benchmark rate, and for existing ones transitioning from LIBOR, it's 350 bps.
How it plays out — a real example
A forex & trade-finance officer in Indore, Mr. Kumar, needs to update the loan agreement for a foreign currency ECB to use the new ARR benchmark rate instead of LIBOR. He ensures that the all-in-cost ceiling is 500 bps over the benchmark rate, providing a smoother transition for the borrower. Mr. Kumar communicates the changes to the borrower and updates the internal systems to reflect the new ARR benchmark rate.
What changed
RBI redefined the benchmark rate for FCY ECBs and TCs from 6-month LIBOR to any widely accepted interbank rate or ARR of 6-month tenor. The all-in-cost ceiling for new FCY ECBs and TCs was raised by 50 bps to 500 bps and 300 bps, respectively, over the new benchmark. For existing ECBs/TCs transitioning from LIBOR to ARRs, the ceiling was increased by 100 bps to 550 bps and 350 bps, respectively.
What it means for you
Banks and lenders must update their loan documentation and pricing models to reference ARRs instead of LIBOR for FCY ECBs and TCs. The higher all-in-cost ceilings provide headroom for the credit risk and term premia differences between LIBOR and ARRs, ensuring smoother transition. This change applies only to FCY borrowings; INR benchmarks remain unchanged.
What you must do
Update internal systems and loan agreements to reference ARRs instead of LIBOR for FCY ECBs and TCs.
Ensure that any revision in all-in-cost ceiling for existing loans is solely due to LIBOR transition and not other factors.
Communicate the revised benchmark and ceiling changes to all constituents and customers dealing with FCY ECBs and TCs.
Monitor compliance with the new all-in-cost ceilings of 500 bps (new) and 550 bps (existing) for ECBs, and 300 bps (new) and 350 bps (existing) for TCs.
Who it affects
Category-I Authorised Dealer Banks, Borrowers of foreign currency ECBs and TCs, Lenders and arrangers of FCY ECBs and TCs
❓ Common questions
What is the new benchmark rate for FCY ECBs and TCs?
The benchmark rate now refers to any widely accepted interbank rate or alternative reference rate (ARR) of 6-month tenor applicable to the currency of borrowing, replacing the earlier 6-month LIBOR.
How much has the all-in-cost ceiling increased for new FCY ECBs?
The all-in-cost ceiling for new FCY ECBs has been increased by 50 basis points to 500 bps over the benchmark rate.
Does this circular affect INR-denominated ECBs or TCs?
No, there is no change in the all-in-cost benchmark and ceiling for INR ECBs or TCs.
📜 Read the original circular — full text as issued by RBI
RBI/2021-22/135
A.P. (DIR Series) Circular No. 19
December 08, 2021
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) and Trade Credits (TC) Policy – Changes due to LIBOR transition
Please refer to paragraph 3 of the Governor’s Statement on Developmental and Regulatory Policies dated December 08, 2021 . In this connection, attention of Authorised Dealer Category-I (AD Category-I) banks is invited to paragraph 1.5, 2.1.vi. and 14.vi. of the of Master Direction No.5 dated March 26, 2019 , on “External Commercial Borrowings, Trade Credits and Structured Obligations”, prescribing the benchmark rates and the maximum spread over benchmark for calculating the all-in-cost for foreign currency (FCY) ECBs and TCs.
2. In view of the imminent discontinuance of LIBOR as a benchmark rate, it has been decided, in consultation with stakeholders, to make the following changes to the all-in-cost benchmark and ceiling for FCY ECBs/ TCs:
i. Redefining Benchmark Rate for FCY ECBs and TCs: Currently, the benchmark rate is defined in paragraph 1.5 of the master direction as “benchmark rate in case of FCY ECB/TC refers to 6-months LIBOR rate of different currencies or any other 6-month interbank interest rate applicable to the currency of borrowing, e.g., EURIBOR”. Henceforth, benchmark rate in case of FCY ECB/TC shall refer to any widely accepted interbank rate or alternative reference rate (ARR) of 6-month tenor, applicable to the currency of borrowing.
ii. Change in all-in-cost ceiling for new ECBs/ TCs: To take into account differences in credit risk and term premia between LIBOR and the ARRs, the all-in-cost ceiling for new FCY ECBs and TCs has been increased by 50 bps to 500 bps and 300 bps, respectively, over the benchmark rates.
iii. One Time Adjustment in all-in-cost ceiling for existing ECBs/ TCs: To enable smooth transition of existing ECBs/ TCs linked to LIBOR whose benchmarks are changed to ARRs, the all-in cost ceiling for such ECBs/ TCs has been revised upwards by 100 basis points to 550 bps and 350 bps, respectively, over the ARR. AD Category-I banks must ensure that any such revision in ceiling is only on account of transition from LIBOR to alternative benchmarks.
3. There is no change in the all-in-cost benchmark and ceiling for INR ECBs/ TCs.
4. All other provisions of the ECB/ TC policy remain unchanged. AD Category-I banks should bring the contents of this circular to the notice of their constituents/ customers.
5. The Master Direction No. 5 dated March 26, 2019 , is being updated to reflect the changes.
6. The directions contained in this circular have been issued under section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.
Yours faithfully
Ajay Kumar Misra
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/135 · issued 08 Dec 2021. The plain-English explanation above is BankPulse’s own independent summary.
Update internal systems and loan agreements to reference ARRs instead of LIBOR for FCY ECBs and TCs.
📜 Compliance
Ensure that any revision in all-in-cost ceiling for existing loans is solely due to LIBOR transition and not other factors.
Communicate the revised benchmark and ceiling changes to all constituents and customers dealing with FCY ECBs and TCs.
Monitor compliance with the new all-in-cost ceilings of 500 bps (new) and 550 bps (existing) for ECBs, and 300 bps (new) and 350 bps (existing) for TCs.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (Category-I Authorised Dealer Banks, Borrowers of foreign currency ECBs and TCs, Lenders and arrangers of FCY ECBs and TCs), your first concrete step on “RBI revises ECB/TC all-in-cost norms for LIBOR transition” is: “Update internal systems and loan agreements to reference ARRs instead of LIBOR for FCY ECBs and TCs.” (RBI issued this 08 Dec 2021).
Action required: Update internal systems and loan agreements to reference ARRs instead of LIBOR for FCY ECBs and TCs.
Action required: Ensure that any revision in all-in-cost ceiling for existing loans is solely due to LIBOR transition and not other factors.
Action required: Communicate the revised benchmark and ceiling changes to all constituents and customers dealing with FCY ECBs and TCs.
Action required: Monitor compliance with the new all-in-cost ceilings of 500 bps (new) and 550 bps (existing) for ECBs, and 300 bps (new) and 350 bps (existing) for TCs.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12204&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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