MUMBAI: In a move that will help Indian companies and non-banking finance companies (NBFC) to tide over liquidity crisis, the Reserve Bank of India (RBI) on Tuesday relaxed norms on end-use of the external commercial borrowings (ECB).
The central bank has allowed them to use the funds raised through ECBs for working capital requirements, general corporate purposes and repayment of rupee loans.
Allowing non-banking financial institutions to raise ECB with average maturity period of 10 years for on-lending will spur their lending, as well as help them overcome asset-liability mismatches on long tenor lending.
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“For repayment of rupee loans availed domestically for purposes other than capital expenditure and for on-lending by NBFCs for the same, the minimum average maturity period of ECB would have to be 10 years,” the Reserve Bank said.
RBI has also allowed eligible corporate borrowers to access ECB loans for repayment of rupee loans that are classified as SMA-2 (Special Mention Accounts) or to simply put, non-performing assets (NPA). SMA-2, as per the RBI classification, are loans where principal or interest payment are overdue between 61-90 days.
Lenders have also been allowed to sell the loans classified as NPA through assignment to ECB lenders except foreign branches/overseas subsidiaries of Indian banks. EBCs, however, have to comply with the all-in-cost minimum average maturity period and other relevant RBI norms.