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India's central bank has finalised relaxed rules for foreign borrowings, enhancing flexibility for corporates to raise debt overseas. Companies can now borrow up to USD 1 billion or 300% of their net worth, in foreign currencies or Indian rupees, with a minimum three-year maturity and market-aligned costs. The rules allow refinancing of existing loans and conversion of ECBs into non-debt instruments under foreign exchange regulations. Some end-use restrictions, including real estate projects, remain. The move reflects the central bank's effort to support corporate financing while maintaining regulatory oversight.
India's central bank has finalised the new framework for foreign borrowings, which was first proposed last year, aiming to provide companies with greater flexibility in raising debt overseas. The updated rules, released late on Monday, allow eligible firms to borrow larger amounts from foreign sources and also to raise debt at market-determined costs, removing previous restrictions on borrowing expenses. Advertisement
Under the new guidelines, companies can secure external financing up to USD 1 billion or 300% of their net worth, whichever is lower. These borrowings can be denominated in foreign currencies or Indian rupees. Eligible borrowers can issue external commercial borrowings (ECBs) with a minimum average maturity of three years, and the cost of borrowing is to align with prevailing market conditions.
The rules also permit companies to use ECBs to refinance existing loans. In addition, ECBs may be converted into non-debt instruments, provided they comply with foreign exchange regulations. However, some restrictions remain on how the funds can be used. For example, borrowing for real estate projects continues to be restricted unless the structure meets regulatory requirements.
This move follows earlier proposals and feedback from corporates seeking more flexibility to manage overseas debt. By allowing higher borrowing limits and market-based cost determination, the central bank aims to support corporate financing options while maintaining oversight on risk and compliance.
Source Reuters
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