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Rescheduling or Restructuring of External Commercial Borrowings (ECB)

Rescheduling or Restructuring of External Commercial Borrowings (ECB)

The Reserve Bank of India has relaxed rules for rescheduling/restructuring of ECBs by permitting an increase in the total cost of borrowing offshore. In suppression of earlier provisions, this year the banking regulator has delegated powers to the designated AD category-I banks to allow changes/modification in the draw-down and repayment schedules notwithstanding the average maturity period or changes (decrease/increase) in the all in cost of such overseas borrowings.

The AD category-I banks have the discretionary powers to deal with cases related to changes/modification, reduction in the amount of ECB, the increase in all-in-cost of ECB without restriction on the  number of occasions. However they have to ensure that the following stipulations are complied with.

  1. The changes are effected during the tenure of ECB. Revised average maturity period and/or all-in-cost shall be in conformity with the applicable ceilings/guidelines. If the lender is an overseas branch/subsidiary of an Indian Bank, the changes shall be subject to the applicable prudential norms.
  2. The designated AD banks may permit changes in the name of lender of ECB after satisfying themselves with the bonafides of the transactions. While allowing transactions banks have to ensure that the ECB continues to be in compliance of applicable guidelines.
  3. The transfer of the ECB from one company to another on account of re-organisation at the borrower’s level in the form of merger / demerger / amalgamation / acquisition duly as per the applicable laws / rules may allowed after the banks satisfying themselves that the company acquiring the ECB is an eligible borrower and ECB continues to be in compliance with applicable guidelines.

The above measures will be applicable for ECBs raised both under the automatic and approval routes. FCCBs (Foreign Currency Convertible Bonds) will, however, not be covered within these provisions.

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