The government has asked the Reserve Bank to reconsider its external commercial borrowing (ECB) norms to allow foreign currency debt to infrastructure sector for medium term also. In a letter to RBI Governor Raghuram Rajan, Road, Transport and Highways Secretary Vijay Chhibber has urged him to examine the ECB policy to allow overseas borrowings under medium term also. The RBI, in November, allowed infrastructure companies to access long-term foreign currency denominated ECB with maturity of 10 years (Track II) and Indian rupee-denominated ECB with average maturity of 3 to 5 years (Track III) .
"Limiting ECBs in the infrastructure sector in Track II and III only is restrictive and international lenders including JBIC in the current scenario, may not be forthcoming to provide long-term ECBs to Indian companies in the infrastructure space," Chhibber wrote in the letter. Sources said Chhibber has written that "many export credit agencies are required to follow OECD arrangements wherein a member is not permitted to extend export credit beyond a period of 10 years for all categories (except non nuclear power plants) for a category II country such as India, whereas the revised ECB framework allow Indian infrastructure companies to access long term foreign currency borrowings with a minimum average maturity of 10 years (under Track II)". The central bank on November 30 announced its revised ECB norms -- Track I for medium term foreign currency denominated ECB with minimum average maturity (MAM) of 3 to 5 years; Track II for long term foreign currency denominated ECB with maturity of 10 years and Track III for Indian rupee denominated ECB with average maturity of 3 to 5 years.
Indian infrastructure companies are eligible for accessing ECBs only under Track II (long term foreign currency borrowings with a minimum average maturity (MAM) of 10 years) or under Track III (Indian rupee denominated ECBs with a MAM of 3/5 years). Chhibber wrote that under the circumstances there would be limited scope for OECD (Organisation for Economic Cooperation and Development)member countries to extend export credit to Indian infrastructure companies as per the revised ECB framework of RBI. The Secretary has mentioned JBIC's request to reconsider the policy also. To attract more overseas fund, the RBI relaxed the ECB norms with fewer restrictions on end uses and allowed loans from sovereign wealth funds, pension funds and insurers. The revised framework also includes a more liberal approach for rupee-denominated ECBs where the currency risk is borne by the lender.Source: Credai NCR