The Reserve Bank of India (RBI) has raised the annual ceiling on offshore borrowings by domestic companies to $500 million from $100 million to boost capital inflows and shore up the rupee. The development should lead to higher requirements for corporate foreign exchange risk advice given the larger borrowing capacities.
Companies using the ‘external commercial borrowing’ (ECB) automatic route do not need prior central bank approval.
The ECBs can be used for rupee or foreign currency expenditures. A requirement for a minimum average maturity period of seven years for ECBs worth more than $100 million has been scrapped. Ceilings on the borrowing spread above the six month Libor rate has been increased by the RBI to between 300 to 500 basis points (bps) from 200 to 450 bps, depending on the maturities which range from three years to more than seven years.