Following is the text of statement of Secretary, Economic Affairs Shri Ashok Chawla made at a media briefing here today:

            "The External Commercial Borrowing (ECB) policy has been reviewed to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and lessons of experience.

            Consequent upon such a review, Reserve Bank of India has issued A. P. (DIR series) circular no. 26  dated October 22, 2008, to modify some aspects of the ECB policy as indicated below:

Henceforth, ECB up to USD 500 million per borrower per financial year would be permitted for Rupee expenditure and / or foreign currency expenditure for permissible end - uses under the Automatic Route. Accordingly, the requirement of minimum average maturity period of seven years for ECB more than USD 100 million for Rupee capital expenditure by the borrowers in the infrastructure sector has been dispensed with.

In order to further develop the telecom sector in the country, payment for obtaining license/permit for 3G Spectrum will be considered an eligible end - use for the purpose of ECB.

At present, ECB proceeds are required to be parked overseas until actual requirement in India and such proceeds can be invested in the following liquid assets (a) deposits or certificate of deposit offered by banks rated not less than AA
(-) by Standard and Poor / Fitch IBCA or Aa3 by Moody's; (b) deposits with overseas branch of an AD bank in India; and (c) Treasury bills and other monetary instruments of one year maturity having minimum rating as indicated above. It has now been decided that henceforth the borrowers will be extended the flexibility to either keep these funds off-shore as above or keep it with the overseas branches / subsidiaries of Indian banks abroad or to remit these funds to India for credit to their Rupee accounts with AD Category I banks in India, pending  utilisation for permissible end-uses.  However, as hitherto, the rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.  

In view of the tight liquidity conditions in the International financial markets, it has been decided to rationalize and enhance the all-in-cost ceilings as under:

Average Maturity Period	All-in-Cost ceilings over 6 Months LIBOR*
	Existing	Revised
Three years and up to five years	200 bps	300 bps
More than five years and up to seven  years	350 bps	500 bps
More than seven years	450 bps

* for the respective currency of borrowing or applicable benchmark.

The all-in-cost ceilings will be reviewed from time to time depending on the conditions in the international financial markets.

Keeping in view the risks associated with unhedged foreign exchange exposures of SMEs, a system of monitoring such unhedged exposures by the banks on a regular basis is being put in place.

            In addition, the credit enhancement window available in the present ECB policy would be fully operationalised.

             All other aspects of ECB policy such as eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged."

BSC/SS/DN-276/08

External Commercial Borrowings policy relaxed to allow rupee and foreign currency expenditure under the automatic route and broaden eligible uses. ECB policy now permits specified borrowings under the Automatic Route for rupee and foreign currency expenditure for permissible end uses, removes a prior minimum maturity requirement for large rupee infrastructure capital expenditure within the threshold, and recognises telecom spectrum payments as an eligible end use. Borrowers may hold proceeds offshore in prescribed instruments, with overseas bank affiliates, or remit to rupee accounts pending utilisation, subject to prohibitions on capital market, real estate and inter corporate lending. Authorities have raised and will review all in cost ceilings by maturity band, instituted monitoring of SME unhedged forex exposures, and will operationalise the credit enhancement window.