RBI caps ECB limit at 6.5 per cent of GDP at USD 160 billion

RBI last month reduced mandatory hedging provision to 70 per cent from 100 per cent for loans with maturities between three and five years, which would bring down the cost of borrowing.

A Reserve Bank of India (RBI) logo is seen at the gate of its office in New Delhi, India.

MUMBAI: After a series of relaxations in the external commercial borrowings (ECB) norms, Reserve Bank of India on Thursday announced a cap of 6.5 per cent of GDP at current market prices giving lot more headroom for raising money overseas.

“It has been decided in consultation with the Government of India to have a rule-based dynamic limit for outstanding stock of ECB at 6.5 per cent of GDP at current market prices,” RBI said in a release. This, it said, works out to a soft limit of $160 billion based on the GDP figures as on March 31, 2018.

With the outstanding stock of ECB as on September 30, 2018 was at $126.29 billion, the rise in limit to $160 billion gives enough headroom for additional ECB borrowings.

RBI last month reduced mandatory hedging provision to 70 per cent from 100 per cent for loans with maturities between three and five years, which would bring down the cost of borrowing.