The Reserve Bank of India (RBI), through AP (DIR Series) Circular Nos. 51 and 52, both dated 23 November, has enhanced the all-in-cost ceiling for external commercial borrowings (ECBs) having an average maturity period between three years and five years and has revised the norms relating to parking of the ECBs overseas.
All-in-cost ceiling
Through Circular 51, the all-in-cost ceiling for ECBs having tenures of three to five years was raised to 350 basis points over the six-month London interbank offered rate (LIBOR), in light of the difficulties faced by the borrowers in raising ECBs within the previous ceiling of 300 basis points above the LIBOR. The enhanced all-in-cost ceiling will apply up to 31 March and then is subject to review.
The all-in-cost ceiling for ECBs with a maturity period of more than five years remains at 500 basis points above the six-month LIBOR.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
