Cos can borrow from pension, sovereign funds: RBI Draft


In a big corporate news as well as Indian bureaucracy news update; to ease overseas borrowing for Indian corporates, the RBI has proposed a host of relaxations, including expanding the list of potential lenders and moving towards a negative list of end-uses. The central bank has also prescribed an easier regime for rupee-denominated foreign borrowing where the currency risk is borne by the lender.

RBI’s draft framework for external commercial borrowings (ECBs), released on Wednesday, has been prompted by the government’s aim to attract long-term funds to the infrastructure sector and help companies access funds at a reasonable cost. Participation of Indian banks as ECB lenders will be subject to prudential norms issued by the RBI, according to the draft framework. Part-prepayment of ECBs, including part-prepayment through fresh ECBs, will also be permitted subject to conditions. Refinancing of existing ECBs with a fresh ECB with higher all-in-cost (but within the ceiling) will now be permitted. RBI’s draft aims to expand the list of recognized lenders to include entities having long-term interest in India. Overseas regulated financial entities, pension funds, insurance funds, sovereign wealth funds and similar other long-term investors are included in the list of recognized lenders for long term funding into India.

“A more liberal regime for rupee-denominated borrowings will serve multiple objectives. Besides lowering risks for the borrower it will help in internationalizing the rupee and would reduce the compulsion for the RBI to build large forex reserves,” said an official with a multinational bank. wishes the very best.

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