The salient features of the framework for Rupee denominated bonds overseas under External Commercial Borrowing policy are as follows.
Eligibility to borrow: All corporate or corporate body, Real Estate Investment Trust (REIT) and Infrastructure Investment Trusts (REITs) are eligible to borrow under ECB policy.
Investors in bonds: Any investor from a Financial Action Task Force (FATF) compliant jurisdiction is considered as recognized investor who can invest in Rupee denominated bonds. FATF is an inter-governmental body which is constituted for the purpose of developing and promoting policies to combat money laundering and terrorist financing.
Maximum eligible amount of borrowings: The eligible borrowers under ECB automatic route are eligible to borrow USD 750 million or equivalent per year. The borrowers under approval routes such as hotels, hospitals, software sector are allowed to avail of ECB up to USD 200 million or its equivalent in a financial year for meeting the foreign currency and or Indian Rupee capital expenditure. The money received under ECB should not be used for acquisition of land. The Micro Finance Institutions and NGOs engaged in micro finance activities are allowed to borrow under ECB up to USD 10 million or its equivalent with a condition that the future foreign exchange exposure should be fully hedged. In the cases of Infrastructure Finance Companies and Asset Finance Companies (NBFC), the company may be allowed to borrow 75% of their own funds against hedging 75% of their currency risk exposures. The Small Industries Development Bank of India (SIDBI) is eligible to borrow up to 50% of its own capital with a maximum limit of USD 500 million or its equivalent per financial year.
Maturity: Minimum maturity period of 5 years.
All-in-cost: All in cost should be commensurate with prevailing market conditions. At present, the ‘all-in-cost’ ceilings for ECBs with average maturity period from 3 years to 5 years is at over six months LIBOR* + 350 Basis points (LIBOR* + 3.50%). For average maturity period of above 5 years ‘all-in-cost’ ceiling is at over six months LIBOR* + 500 Basis points (LIBOR* + 5.00%).
End-uses: No end-use restrictions except for a negative list.
Other requirements: The provisions of extant guidelines for External Commercial Borrowings (ECB) including obtaining Loan Registration Number (LRN) also applicable for issuance of Rupee denominated bonds overseas. Reporting-of-loan-agreement-details in Form 83 to RBI for obtaining LRN the type of ECB is to be specifically mentioned. The other detail like parking of bond proceeds, security/guarantee for the borrowings, conversion into equity, corporates under investigation etc., will also be applicable.