Further liberalisation of External Commercial Borrowing (ECB) regulations

Infrastructure and Hospitality sectors continue being regarded as very significant bedrocks of the Indian economy. For giving additional boost to these sectors, the RBI has further liberalised the External Commercial Borrowing (ECB) Regulations, effective from January 02, 2008.

(i) Integrated township

Under the new Regulations Indian corporates engaged in the development of integrated townships are permitted to avail of ECB under the Approval Route.

Integrated township includes housing, commercial premises, hotels, resorts, city & regional level urban infrastructure facilities such as roads and bridges, mass-rapid-transit-systems and manufacture of building materials. Land Development and provision of allied infrastructure also comes within the ambit of Integrated Township.

To avail of the benefits it is necessary that the minimum area sought to be developed is at least 100 acres; norms and standards are to be followed as per local bye-laws / rules. In the absence of such bye-laws/ rules, a minimum of 2000 dwelling units for about 10,000 population will need to be developed.

This position will be reviewed in June 2009.

(ii) Non-Banking Financial Companies (NBFCs) financing infrastructure projects

NBFCs involved exclusively in financing of infrastructure sector, can now avail of ECBs, under the Approval route, from multilateral / regional financial institutions and Government-owned development financial institutions for onward lending to the borrowers in the infrastructure sector. This move is expected to ease the financial crunch in the infrastructure sector.
This facility too will be reviewed in June 2009.

(iii) Services sector

Services sector entities i.e. Hotels, Hospitals and Software establishments are now allowed to avail of ECB to the tune of USD 100 million per financial year, under the Automatic Route. They can avail this benefit for foreign currency and / or Rupee capital expenditure for permissible end-use. However, there is a stipulation that the proceeds of the ECBs should not be used for acquisition of land. Earlier, ECB up to USD 100 million per financial year was permitted under the approval route only for import of capital goods.
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