RBI/2011-12/203
A.P. (DIR Series) Circular No. 28
September 26, 2011
To,
All Category - I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy – Structured Obligations for
infrastructure sector
Attention of Authorised Dealer Category - I (AD Category - I) banks is invited
to
A.P. (DIR Series) Circular No. 40 dated March 02, 2010 relating to External
Commercial Borrowings (ECB) Policy – Structured Obligations.
- As per extant guidelines, credit enhancement is permitted to be provided by
multilateral / regional financial institutions and Government owned development
financial institutions for domestic debt raised through issue of capital market
instruments, such as, debentures and bonds, by Indian companies engaged
exclusively in the development of infrastructure and by the Infrastructure
Finance Companies (IFCs), which have been classified as such by the Reserve Bank
under the approval route.
- On a review, it has been decided to further liberalise the policy relating to
structured obligations to permit direct foreign equity holder(s) as per extant
ECB guidelines (minimum holding of 25 per cent of the paid up capital) and
indirect foreign equity holder, holding atleast 51% of the paid-up capital, to
provide credit enhancement to Indian companies engaged exclusively in the
development of infrastructure, where “infrastructure” is as defined under the
extant guidelines on ECB and by the Infrastructure Finance Companies (IFCs),
which have been classified as such by the Reserve Bank.
- Credit enhancement by all eligible non-resident entities will henceforth be
permitted under the automatic route and no prior approval will be required from
the Reserve Bank. All the other terms and conditions mentioned in para 4 (ii) to
(viii) of A.P. (DIR Series) Circular No. 40 dated March 02, 2010 will remain
unchanged.
- The amended policy will come into force with immediate effect and is subject
to review.
- AD Category - I banks may bring the contents of this circular to the notice
of their constituents and customers.
- The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager