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, it has been decided to modify some aspects of the ECB policy as indicated below:

All-in-cost ceilings on ECB

As per extant ECB policy, the all-in-cost ceilings for ECBs, in respect of both automatic as well as approval routes, for average maturity period of 3-5 years and more than years are 6 month Libor+300 bps and 6 month Libor+500 bps respectively.

Keeping in view the credit conditions in the international and domestic financial markets, it has been decided to dispense with the requirement of all-in-cost ceilings on ECB until June 30, 2009. Eligible borrowers proposing to avail of ECB beyond the permissible all-in-cost ceilings specified in para 2 above may approach the Reserve Bank of India under the approval route. This relaxation in all-in-cost ceiling will be reviewed in June 2009.

ECBs for development of integrated township

In May 2007, RBI had withdrawn the exemption accorded to the 'development of integrated township' as a permissible end-use of ECB. It has now been decided to permit corporates engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002 issued by the Ministry of Commerce & Industry, to avail of ECB under the Approval Route. This facility will be reviewed in June 2009.

ECBs for NBFCs exclusively engaged in financing of the infrastructure sector

As per the extant policy guidelines on ECB, NBFCs are permitted to avail of ECB for a minimum maturity period of five years to finance import of infrastructure equipments for leasing to infrastructure projects in India. It has now been decided to allow NBFCs, which are exclusively involved in financing of the infrastructure sector, to avail of ECBs from multilateral/regional financial institutions and government owned development financial institutions under the approval route. While considering the applications, RBI will take into account the aggregate commitment of these lenders directly to infrastructure projects in India. The direct lending portfolio of the above lenders vis-à-vis their total ECB lending to NBFCs, at any point of time should not be less than 3:1. This facility will be reviewed in June 2009.

ECBs by the services sector

At present entities in the services sector namely Hotels, Hospitals and Software sector are allowed to avail of ECB up to USD 100 million per financial year for import of capital goods under the approval route. It has now been decided to permit the corporates in the Hotels, Hospitals and Software sectors to avail ECB up to USD 100 million per year for both foreign currency and / or Rupee capital expenditure for permissible end use, other than for land acquisition, under the Automatic Route.

Limit for FIIs' investment in corporate debt

Currently, FIIs have been permitted to invest up to USD 6 billion in corporate debt. It has now been decided to enhance the limit to USD 15 billion.

. All other aspects of ECB policy such as USD 500 million limit per company per year under the Automatic Route, eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

. The above amendments in ECB policy will come into force on the date of Notification of Regulations / directions issued by the Reserve Bank in this regard under the Foreign Exchange Management Act, 1999. ECB policy liberalisation suspends all-in-cost ceilings temporarily and widens eligible borrowers and routes for external borrowing. The ECB policy review dispenses with the requirement of all-in-cost ceilings until review and allows borrowers exceeding prior ceilings to seek approval from the Reserve Bank; concurrently, it permits integrated township developers and specified NBFCs to access ECBs under the approval route (with a direct-lending ratio condition), moves certain services sector capital expenditure ECBs to the automatic route (excluding land acquisition), and raises the FII corporate debt investment ceiling, with changes effective on RBI notification.