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RBI Increase the Overall Limit of External Commercial Borrowings (ECBs) Under Automatic Route

RBI Increase the Overall Limit of External Commercial Borrowings (ECBs) Under Automatic Route

External Commercial Borrowings (ECBs) are commercial loans raised by eligible resident entities from the recognised non-resident entities.

ECBs can be raised under the automatic route as well as the approval route.

Automatic Route means a route or a way of acquiring funds or raising commercial loans from the overseas market (i.e., the recognised non-resident lenders) with the help of AD Bank Category I and without any prior approval of RBI.

However, in Approval Route the eligible borrower requires the prior approval of RBI before raising any funds from the overseas market.

Under the Automatic Route, the eligible borrowers can acquire the funds by conforming to the parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling and etc.

The parameters on ECB shall apply in totality and not on a standalone basis.

There are certain changes in the parameters under the automatic route such as: -

Parameters

 

1. Limit

Every Eligible resident borrower can raise funds from the overseas market or from the eligible non-resident lender upto the limit of US$ 750 million or its equivalent during the financial year.

Pursuant to the notification RBI/2022-23/98 A.P. (DIR Series) Circular No. 11 of RBI dated 01 August, 2022.

Now, the limit under the automatic route has been increased to US$ 1.5 billion or its equivalent during the financial year.

2. All-in cost ceiling

The all-in cost ceiling means the rate of interest, which is required to be paid by the eligible resident borrower to the eligible non-resident lender.

Pursuant to the notification RBI/2022-23/98 A.P. (DIR Series) Circular No. 11 of RBI dated 01 August, 2022.

 the all-in cost ceiling is also being raised by 100 basis points. (i.e., Benchmark rate plus 550 Bps).

Before, it was Benchmark rate plus 450 Bps.

The enhanced all-in cost ceiling shall be available only to eligible borrowers of investment grade rating from Indian Credit Rating Agencies (CRAs). Other eligible borrowers may raise ECB within the existing all-in-cost ceiling, as hitherto

The above dispensations are available for ECB to be raised till December 31, 2022. In case of any query, please feel free to contact the ASC Group.

 

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