RBI Eases Norms to Raise Funds via External Commercial Borrowings

Relaxing norms to raise money via external commercial borrowings (ECBs), the Reserve Bank of India has allowed firms in the manufacturing, hospitals, infrastructure, hotels, and software sectors to raise foreign capital from foreign/indirect equity holders without its approval.

As per the extant policy, ECBs from direct foreign equity holders (FEHs) are considered both under the automatic and the approval routes.

ECBs from indirect equity holders and group companies and ECBs from direct FEH for general corporate purpose are, however, considered under the approval route.

Besides, any request for change of the ECB lender in case of FEH requires RBI's approval.

"As a measure of simplification of the existing procedure, it has been decided to delegate powers to banks to approve proposals for raising ECB by companies belonging to manufacturing, infrastructure, hotels, hospitals and software sectors from indirect equity holders and group companies under automatic route," the RBI said in a notification.

Raising ECB for companies in miscellaneous services from direct/indirect equity holders and group companies are also allowed to raise funds through this facility.

Miscellaneous services are like training activities (but not educational institutes), research and development activities and companies supporting infrastructure sector.

Trading business, logistics services, financial services and consultancy services are, however, not covered under the facility, the apex bank said.

ECB proposals involving change of lender when the ECB is from FEH, direct/indirect equity holders and group company is also covered under this arrangement, it added.

"These changes will come into force with immediate effect," the notification said.