RBI relaxes borrowing norms for greater access to capital

External commercial borrowings (ECB) have been an increasingly popular route for Indian enterprises looking for alternative funding avenues outside India. This is particularly because domestic borrowing costs are seen as being much higher than foreign borrowing.

The global economic meltdown has, however, hindered Indian entities’ access to ECBs and trade credits over the last two years.

To provide the necessary stimulus to the infrastructure sector and also flexibility to Indian corporates to raise foreign currency borrowings, the Reserve Bank of India (RBI) has ushered in changes to the existing ECB policy.

New terms and conditions

Presently, ECB policy maintains that any modifications to the terms and conditions of an ECB, require prior RBI approval.

Shardul Thacker is a partner with Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.