The Hindu : Business : Reserve Bank modifies ECB policy

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Thursday, Oct 23, 2008
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Reserve Bank modifies ECB policy

Special Correspondent

Proceeds can be used for obtaining licence for 3G Spectrum

MUMBAI: The Reserve Bank of India (RBI), on a review, decided to modify the External Commercial Borrowing (ECB) policy by permitting ECB up to $500 million per borrower per financial year for rupee expenditure and/or foreign currency expenditure for permissible end-uses under the automatic route.

“Accordingly, the requirement of minimum average maturity period of seven years for ECB more than $100 million for rupee capital expenditure by the borrowers in the infrastructure sector has been dispensed with,” RBI stated on Wednesday.

In order to further develop the telecom sector, payment for obtaining licence or permit for 3G Spectrum will be considered an eligible end-use for the purpose of ECB.

It has now been decided that henceforth borrowers will be extended the flexibility to either keep these funds offshore in liquid assets as prescribed or keep it with the overseas branches or subsidiaries of Indian banks abroad or to remit these funds to India for credit to their rupee accounts with Authorised Dealer Category I banks in India, pending utilisation for permissible end-uses. However, the rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.

The amendments to the ECB guidelines will come into force with immediate effect. All other aspects of ECB policy remain unchanged.

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