REGULATORY · COMPETITIVE · INDIA
RBI raises external commercial borrowing cap to $1bn
Economic Times
17 Feb · 11:44 AM
Change
RBI revised External Commercial Borrowings (ECB) rules, increasing the eligible outstanding borrowing cap to the higher of $1 billion or 300% of net worth (from $750 million) and removing cost caps while setting a 3-year minimum average maturity with a limited short-maturity window for manufacturers.
Why it matters
The revised framework changes the binding constraint for many borrowers from a $750m ceiling to a higher of $1bn outstanding or 300% of net worth, which can expand permissible ECB headroom for larger balance sheets. RBI also excluded non-fund based facilities and mandatorily convertible equity instruments from the cap calculation, altering how groups compute remaining capacity. Removal of cost caps and alignment of pricing norms to market benchmarks changes the effective pricing corridor, especially for fixed-rate structures where swap spreads now factor into the ceiling construct. A minimum average maturity of three years becomes the default, while manufacturers get a defined exception to raise up to $150m with maturities between one and three years. The changes land as ECB volumes have been rising, with FY25 issuance cited at $61bn versus $48bn in FY24, increasing the relevance of the updated limits for near-term funding programs.
Implications
- • Higher ECB headroom for borrowers near prior $750m cap
- • Cap calculations change by excluding certain instruments/facilities
- • Short-tenor ECB largely constrained to trade-credit cost ceilings
- • Manufacturers gain defined 1–3 year tenor access up to $150m
Who is affected
- • Indian corporates raising offshore debt via ECBs
- • Manufacturing companies seeking 1–3 year foreign-currency funding
- • Banks and arrangers structuring ECB facilities and pricing
- • Corporate treasury and finance teams managing net-worth-linked limits
Source
Read full article on Economic Times →
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