Sunday 28 August 2016

RBI Allows ECB Lenders to Extend Loans in Rupees


Relaxing norms for external borrowings, the RBI today allowed ECB lenders can now extend loans in Indian Rupees to domestic businesses.

"With a view to providing greater flexibility for structuring of external commercial borrowings (ECB) arrangements, it has been decided that recognised non-resident ECB lenders may extend loans in Indian rupees," the RBI said in a notification.

The RBI further said for lending in rupees, the lender would have to follow certain conditions, including currency swaps with authorised banks.

"The ECB contract should comply with all other conditions applicable to the automatic and approval routes as the case may be," it added.

Also, the all-in-cost of such ECBs should be commensurate with prevailing market conditions, it added.

The central bank further said that for executing swaps for ECBs denominated in rupees, the lender could also set up a representative office in India.

Fund raised from overseas in domestic currency will help Indian companies to deal with risks associated with currency fluctuation.

Meanwhile, in another notification on transfer of assets and liabilities of Urban Cooperative Banks to commercial banks, the RBI said "the acquiring bank should not incur any loss arising out of the said merger/ transfer of assets and liabilities".

Also, big depositors holding deposits in excess of Rs 1 lakh each will be required to sacrifice in proportion to the deposit erosion of the target bank.

The 2010 circular in this regard has been amended with a view to ensuring that the process of consolidation is undertaken in a transparent manner without affecting the financial health of the acquiring entities and the banking system as a whole.

TAGS: BankingLoansRBI
SECTION: Business
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