RBI relaxes norms to raise funds through ECB route

However, the country's central bank has restricted resolution applicants from raising funds from the foreign branches of Indian banks.

The Reserve Bank of India (RBI) has eased the external commercial borrowing norms to allow bidders under the Insolvency and Bankruptcy Code (IBC) to raise funds abroad to pay the debtor back home.
 
However, the country's central bank has restricted resolution applicants from raising funds from the foreign branches of Indian banks.
 
"...it is proposed to relax the end-use restrictions under the approval route of the ECB framework for resolution applicants under the CIRP and allow them to utilise the ECB proceeds for repayment of Rupee term loans of the target company," said RBI in a statement on Thursday.
 
Such ECBs could be availed from all eligible lenders under the extant ECB framework except from overseas branches/subsidiaries of Indian banks, it further said.
 
Under the extant ECB framework, proceeds of ECB denominated in either foreign currency or Indian Rupee (INR), are not permitted to be utilised for repayment or for on-lending for repayment of domestic Rupee loans. 
 
The resolution applicants under Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code (IBC), 2016 may find it attractive to borrow abroad to repay the existing lenders, the statement said. 
The move comes as a relief for bidders who can use the new funding route to acquire stressed assets under the IBC.
 
As per RBI, guidelines in this regard will be issued by the end of February 2019.
 
Source: RBI, media reports

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