**Policy Summary: Liberalisation of External Commercial Borrowings (ECB) Policy**
This circular, RBI/2022-23/98 A.P. (DIR Series) Circular No. 11, issued by the Reserve Bank of India (RBI) on August 1, 2022, announces the liberalisation of the External Commercial Borrowings (ECB) policy. The circular amends FED Master Direction No. 5 on External Commercial Borrowings, Trade Credits and Structured Obligations, dated March 26, 2019.
Key changes include:
* **Increased Automatic Route Limit:** The limit for ECBs raised under the automatic route has been increased from USD 750 million (or equivalent) to USD 1.5 billion (or equivalent) per financial year.
* **Increased All-in-Cost Ceiling:** The all-in-cost ceiling for ECBs has been increased by 100 basis points (bps). This enhanced ceiling is exclusively available to eligible borrowers with investment-grade ratings from Indian Credit Rating Agencies (CRAs). Other borrowers are subject to the existing all-in-cost ceiling.
* **Validity:** These relaxations are applicable for ECBs raised until December 31, 2022.
These decisions were made in consultation with the Central Government, as announced in the press release on Liberalisation of Forex Flows dated July 06, 2022. The Foreign Exchange Management Borrowing and Lending Amendment Regulations, 2022, notified vide notification No. FEMA.3R/2022-RB dated July 29, 2022, reflects these changes.
AD Category-I banks are instructed to inform their constituents and customers of these changes.
The directions are issued under section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999).
For further information, contact Ajay Kumar Misra, Chief General Manager-in-Charge, Reserve Bank of India.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the country's monetary policy and banking system.
External Commercial Borrowings: A mechanism that allows Indian companies to raise money from foreign sources in the form of loans.
FED Master Direction No.5: A comprehensive set of guidelines issued by the Reserve Bank of India concerning External Commercial Borrowings, Trade Credits and Structured Obligations.
Automatic Route: A simplified approval process for External Commercial Borrowings, allowing eligible borrowers to raise funds up to a certain limit without requiring prior approval from the Reserve Bank of India.
Indian Credit Rating Agencies: Domestic agencies that assess the creditworthiness of borrowers in India.
Foreign Exchange Management Act, 1999: An act of the Parliament of India enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Ajay Kumar Misra: Chief General Manager-in-Charge at Reserve Bank of India who is responsible for the circular.
Foreign Exchange Management Borrowing and Lending Amendment Regulations, 2022: Amendment regulations related to foreign exchange management borrowing and lending
भारतीय �रज़व र् बक�
RESERVE BANK OF INDIA
RBI/2022-23/98
A.P. (DIR Series) Circular No. 11 August 1, 2022
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy – Liberalisation Measures
Attention is invited to paragraph 2.2 of FED Master Direction No.5 on External Commercial
Borrowings, Trade Credits and Structured Obligations, dated March 26, 2019 (as amended
from time to time), in terms of which eligible ECB borrowers are allowed to raise ECB up to
USD 750 million or equivalent per financial year under the automatic route, and paragraph
2.1.vi. ibid, wherein the all-in-cost ceiling for ECBs has been specified.
2. As announced in paragraph five of the press release on “Liberalisation of Forex Flows”
dated July 06, 2022, it has been decided, in consultation with the Central Government, to:
i) increase the automatic route limit from USD 750 million or equivalent to USD 1.5 billion or
equivalent.
ii) increase the all-in-cost ceiling for ECBs, by 100 bps. The enhanced all-in-cost ceiling shall
be available only to eligible borrowers of investment grade rating from Indian Credit Rating
Agencies (CRAs). Other eligible borrowers may raise ECB within the existing all-in-cost
ceiling, as hitherto.
The above relaxations would be available for ECBs to be raised till December 31, 2022.
3. AD Category-I banks may bring the contents of this circular to the notice of their constituents
and customers.
4. The aforesaid Master Direction No. 5, is being updated to reflect these changes.
5. Necessary amendments to the relevant regulations have been made through the Foreign
Exchange Management (Borrowing and Lending) (Amendment) Regulations, 2022, notified
vide notification No. FEMA.3(R)(3)/2022-RB dated July 29, 2022.
6. The directions contained in this circular have been issued under section 10(4) and 11(2) of
the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to
permissions/ approvals, if any, required under any other law.
Yours faithfully,
(Ajay Kumar Misra)
Chief General Manager-in-Charge