Credit crisis prompts further ECB relaxation

By Karan Singh and Ameya Khandge,Trilegal
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In the July/August edition of India Business Law Journal, we outlined the series of recent relaxations introduced by the Reserve Bank of India (RBI) to the exchange control policy governing external commercial borrowings (ECBs) raised by Indian entities.

Close on the heels of these changes, and as a further measure against the global credit crisis, the RBI has introduced a slew of further relaxations to ECB policy, pursuant to its circular issued on 22 October. The changes are, perhaps, the most sweeping reforms to the ECB guidelines in the last seven months and seek to mitigate the overall impact of the credit crunch on the Indian economy.

Rupee expenditure

According to the circular, ECBs of up to US$500 million per borrower per financial year are now permitted for rupee expenditure and/or foreign currency expenditure for permissible end-uses under the automatic route. The change marks a reversal to the position prevailing prior to August 2007, when ECBs for rupee expenditure up to this limit were obtainable under the automatic route.

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Karan Singh is a partner and Ameya Khandge is a counsel at Trilegal in Mumbai. Trilegal is a full-service law firm that advises on corporate and commercial law in India and provides commercially oriented legal advice in relation to all sectors of the economy. The firm has offices in Delhi, Mumbai, Bangalore and Hyderabad and has over 100 lawyers, some with experience at law firms in the US, the UK and Japan.

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