RBI relaxes external commercial borrowing norms, reduces holding period
NEW DELHI: The Reserve Bank of India (RBI) on Tuesday relaxed external commercial borrowing (ECB) norms for infrastructure companies and tweaked certain hedging provisions.
The central bank has reduced the minimum average maturity requirement for ECBs in the infrastructure space to 3 years from 5 years at present, while also reducing the average maturity period requirement for eligible borrowers exempted from hedging their exposure fully to 5 years from 10 years currently.ECBs with a minimum average maturity period of 3 to 5 years in the infrastructure space will also have to meet a 100 per cent mandatory hedging requirement.
However, ECBs falling under this revised provision, but raised prior to the date of this circular, “will not be required to mandatorily roll over their existing hedges”.The move will help firms that have been looking to raise money overseas given the tight liquidity conditions in the domestic markets, and spiking interest rates. Any increase in the inflow of ECBs would also ease pressure on the rupee-dollar exchange rate.