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RBI has liberalize the ECB automatic route limit.

EXTERNAL COMMERCIAL BORROWINGS (ECB) POLICY – LIBERALISATION MEASURES

• In order to support the Rupee (INR) we need a sufficient amount of forex therefore; RBI has taken various measures to liberalize and increase the forex flows in India.

To enhance foreign investments RBI has come up with 5 major steps dated July 06, 2022 which are:

• Exemption from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on Incremental FCNR(B) and NRE Term Deposits
• Interest Rates on FCNR(B) and NRE Deposits
• FPI Investment in Debt
• Foreign Currency Lending by Authorised Dealer Category I (AD Cat-I) Banks
• External Commercial Borrowings (ECBs)

Now, as per notification dated August 01, 2022, RBI has temporarily increased the limits for raising funds through ECB under the automatic route.

• External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate forex flows by Indian corporations and PSUs (public sector undertakings).
• Under the current External Commercial Borrowings (ECB) regulations, a company is permitted to raise commercial loans from eligible lenders up to USD 750 million or equivalent per financial year without the approval of RBI. However, there are certain provisions that they need to follow for the same.
• After the relaxations, the RBI has temporarily doubled the limit for raising funds without the approval of RBI to USD 1.5 billion per financial year, subject to the approvals with the existing norms of the ECB guidelines.
• Further, the all-in-cost ceiling per annum has been increased by 100 basis points. This shall be available only to eligible borrowers of investment grade rating from Indian Credit Rating Agencies (CRAs).

That means the borrower’s maximum cost on ECB limit has been now been increased by 100 basis points.

 (All-in-Cost ceiling is the maximum cost that the borrower will incur to get the loan through ECB. It includes rate on interest, other fees, expenses, charges etc. but does not include commitment fees, pre-payment charges, or tax payable in Rupees)

These relaxations would apply till 31 December 2022.