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Regulatory Alert: External Commercial Borrowings ('ECB') Policy - Liberalisation

20 September 2018

Vide a notification dated 19 September 2018, the Reserve Bank of India (‘RBI’), in consultation with the Government of India, liberalized the following aspects of the ECB policy and policy on Rupee denominated bonds (‘RDB’).

The liberalized norms have been compared below with the erstwhile norms on the said aspects:


Erstwhile norms

Liberalized norms

ECBs by companies in Manufacturing sector

ECB Amount: up to USD 50 million or its equivalent

Minimum average maturity - 3 years

ECB Amount: up to USD 50 million or its equivalent

Minimum average maturity – now revised to 1 year

Underwriting and market making by Indian banks for RDBs issued overseas

Indian banks, subject to applicable prudential norms, can act as arranger and underwriter for RDBs issued overseas and in case of underwriting an issue, their holding cannot be more than 5 % of the issue size after 6 months of issue

Now, in addition to acting as arrangers / underwriters, Indian banks can also act as market makers and traders in RDBs issued overseas


BDO Comments:

This move seems to be aimed at easing the pressure on the depreciating rupee and controlling the current account deficit, after a review of the economy by the Prime Minister, Mr. Narendra Modi. Also, the liberalization of the ECB policy is a welcome change to the manufacturing sector, since the sector can now borrow from overseas market for their short-term funding needs.