In a relaxation of external commercial borrowing (ECB) policy, the Reserve Bank of India has allowed asset finance companies (AFCs) to tap this window under automatic route.

Till date, non banking finance companies under AFC category were allowed to avail ECBs, but only under the approval route.

RBI has now said that NBFC-AFCs can avail ECBs under the automatic route so long as the minimum average maturity period is five years.

Also, the ECB should be availed to finance the import of infrastructure equipment for leasing to infrastructure projects.

ECBs can be availed under the automatic route up to 75 percent of owned funds of NBFCs-AFCs, subject to a maximum of $ 200 million or its equivalent per financial year, the RBI has said.

AFCs hailed this RBI move to liberalise access to ECBs, but felt that some conditions could deter domestic players from availing this facility.

"It's a liberalisation in the right direction. But it will not have desired effect", Raman Agarwal, Senior Vice

President and Head of Corporate Affairs, SREI Equipment Finance told Business Line here.

He said that RBI should have allowed AFCs to avail ECBs under the automatic route even for funding domestic equipments.

"If ECBs are allowed for financing domestic equipments, then domestic manufacturing could be encouraged", Agarwal said.

He said that RBI is stipulating that the imported equipment has to be leased to infrastructure projects.

"Now leasing is not happening because of taxation issues. So the condition should be that ECB can be availed for financing of equipments for infrastructure projects", Agarwal said.

Finance Industry Development Council (FIDC), a self-regulatory organisation, for asset financing NBFCs, plans to soon write to the RBI seeking changes in the conditions for availing ECBs under the automatic route.

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