What changed
The automatic route limit for external commercial borrowings (ECBs) has been doubled from USD 750 million to USD 1.5 billion per financial year. Additionally, the all-in-cost ceiling for ECBs has been raised by 100 basis points, but this benefit is limited to eligible borrowers with investment-grade ratings from Indian credit rating agencies.
What it means for you
Indian banks and corporates can now access larger ECB amounts under the automatic route without prior RBI approval, easing funding for expansion or refinancing. The higher cost ceiling allows investment-grade borrowers to pay more interest, potentially attracting foreign lenders, but other borrowers must stick to existing caps. This is a temporary relaxation valid only until December 31, 2022.
What you must do
- Update internal ECB processing systems to reflect the new automatic route limit of USD 1.5 billion per financial year.
- Verify borrower credit ratings from Indian CRAs before applying the enhanced all-in-cost ceiling.
- Advise clients on the temporary nature of these relaxations, valid only for ECBs raised by December 31, 2022.
- Ensure compliance with FEMA regulations and updated Master Direction No. 5 for all ECB transactions.
Who it affects
Category-I Authorised Dealer Banks, Eligible ECB borrowers (corporates, NBFCs, etc.), Indian Credit Rating Agencies, Foreign lenders and investors
What is the new automatic route limit for ECBs?
The limit has been increased from USD 750 million to USD 1.5 billion per financial year, effective from August 1, 2022, until December 31, 2022.
Who can benefit from the higher all-in-cost ceiling?
Only eligible borrowers with investment-grade ratings from Indian Credit Rating Agencies (CRAs) can avail the 100 bps increase in the all-in-cost ceiling. Other borrowers must adhere to the existing ceiling.
Is this relaxation permanent?
No, these measures are temporary and apply only to ECBs raised on or before December 31, 2022.