Friday, May 30, 2008

Revision to ECB Policy

MoF revises ECB policy; enhances USD 20 mn limit to USD 50 mn for Rupee expenditure
HAVING reviewed the External Commercial Borrowing (ECB) in in consultation with Reserve Bank of India (RBI) to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and lessons of experience, the Ministry of Finance today enhanced the limit to USD 50 mn for Rupee expenditure for permissible end-users under the approval route.

The policy has been modified as

(i) borrowers in infrastructure sector may avail ECB up to USD 100 million for Rupee expenditure for permissible end-uses under the Approval Route;

(ii) in the case of other borrowers, the existing limit of USD 20 million for Rupee expenditure for permissible end-uses under the Approval Route has been enhanced to USD 50 million.

The all-in-cost ceilings in respect of ECB are modified as follows:
Average Maturity Period All-in-Cost ceilings over 6 Months LIBOR
Existing Proposed
Three years and up to five years 150 bps 200 bps
More than five years 250 bps 350 bps

The above changes will apply to ECB both under the automatic route and the approval route.

All other aspects of ECB policy such as USD 500 million limit per company per year under the Automatic Route, eligible borrower, recognised lender, end-use of foreign currency expenditure for import of capital goods and overseas investments, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

The above amendments in ECB policy will come into force on the date of Notification of Regulations / directions issued by the Reserve Bank in this regard under the Foreign Exchange Management Act, 1999.

FIIs' Investments in Government Securities and Corporate Bonds

At present, FIIs registered with SEBI are permitted to invest in Government Securities and corporate bonds up to USD 3.2 billion and USD 1.5 billion, respectively. It has been decided in consultation with the Reserve Bank to enhance the limits to USD 5 billion and USD 3 billion, respectively. SEBI is being advised to take further action in the matter.

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