The Reserve Bank of India has raised the external commercial borrowing (ECB) limit for non-banking finance companies(NBFCs) classified as infrastructure finance companies (IFCs).
The limit under the automatic route has been enhanced from 50 per cent to 75 per cent of owned funds, including outstanding ECBs.
Such companies desirous of availing ECBs beyond 75 per cent of their owned funds would require the RBI’s approval and will, therefore, be considered under the approval route.
According to the RBI, the permitted end use of ECBs raised by such companies should be for lending to the infrastructure sector, as defined under the ECB policy. These companies should also fully hedge their currency risk.
At least three-fourths of an NBFC-IFC’s total assets are infrastructure loans; it has net owned funds of Rs 300 crore or above; has minimum credit rating A or equivalent from an accredited rating agency; and has a capital-to-risk-weighted-assets ratio of 15 per cent (with a minimum tier-I capital of 10 per cent).
The move to increase the ECB limit comes at a time when the country requires $1 trillion investment in infrastructure in the 12{+t}{+h} Five-Year Plan (2012-2017).