Non-banking finance companies involved in asset financing have been allowed to access the external commercial borrowing (ECB) market.
The RBI in a notification today said: “On a review of ECB policy, it has been decided to allow NBFCs, categorised as Asset Finance Companies (AFCs) by the RBI...to avail of ECB.”
The access is subject to certain conditions including availing of ECB under the automatic route with minimum average maturity of five years to finance import of infrastructure equipment for leasing to infrastructure projects, it said.
Among others, NBFC-AFCs availing of ECB through Foreign Currency Bonds (FCB) will be allowed to raise capital only from markets subject to regulations by the host country complaint with Financial Action Task Force (FATF) guidelines.
Such ECBs can be availed up to 75 per cent of owned funds of NBFC-AFCs subject to a maximum of $ 200 million or its equivalent per financial year.
Also, ECBs by AFCs above 75 per cent of their owned funds will be considered under approval route and currency risk of such ECBs is required to be fully hedged, the RBI said.
As per the extant guidelines, NBFCs are allowed to avail of ECB under approval route from multilateral financial institutions, reputable regional financial institutions, official export credit agencies and international banks with minimum average maturity of 5 years to finance import of infrastructure equipment for leasing to infrastructure projects.
Also, NBFC-Infrastructure Finance Companies (IFCs) are permitted to avail of ECB for on-lending to infrastructure sector both under automatic and approval routes.