External borrowing policy: A commercial perspective

A new external commercial borrowing (ECB) policy was notified by the Reserve Bank of India (RBI) recently, bringing in sweeping changes to the ECB framework. Some key features of the new ECB policy are:

The medium term foreign currency-denominated ECBs and the long-term foreign currency-denominated ECBs (track I and II in the earlier framework) have both been rolled into a consolidated foreign currency-denominated ECB track. The rupee-denominated bonds and the earlier masala bonds and rupee-denominated ECB (track III in the earlier ECB framework) have been merged into rupee-denominated ECB track.

The new policy allows automatic approval of ECBs of up to US$750 million by all eligible borrowers each financial year, replacing the existing sector-wise limits. Even startups are now permitted to raise up to US$3 million under the new policy.

Manoj Kumar is the founder and managing partner at Hammurabi & Solomon