News

RBI may revisit ECB framework to allow lower-rated firms tap overseas debt market

RBI may revisit ECB framework to allow lower-rated firms tap overseas debt market

The Reserve Bank of India (RBI) may revisit its external commercial borrowing (ECB) framework, relaxing parameters such as all-in-cost (AIC) ceiling, tenor, and end-use of funds to enable lower-rated Indian corporates tap this funding route in the backdrop of domestic banks turning risk-averse.

While foreign investors have appetite for Indian debt, the AIC ceiling (includes rate of interest, other fees, expenses, guarantee fees) needs to move higher to reflect the new credit risk and operating environment, according to Arun Saigal, MD and Head of Debt Capital Market, Barclays Bank, India.

This will allow lower-rated borrowers to access offshore debt funds, he added. ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities. They have to conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling (a company cannot pay more than 450 basis points over the benchmark rate (London Inter Bank Offered Rate).

Top