RBI allows overseas branches of banks to refinance ECBs

In a major push to Indian banks having overseas branches, the Reserve Bank of India (RBI) on Wednesday decided to permit them to refinane External Commercial Borrowings of corporates, Navratna and Maharatna PSUs by raising fresh ECBs.
 
Currently Indian corporates are permitted to refinance their existing External Commercial Borrowings (ECBs) at a lower all-in-cost. The overseas branches/subsidiaries of Indian banks are not permitted to extend such refinance.
 
"In order to provide a level playing field, it has been decided, in consultation with the government, to permit the overseas branches/subsidiaries of Indian banks to refinance ECBs of AAA rated corporates as well as Navratna and Maharatna PSUs, by raising fresh ECBs," said the RBI in fifth monetary policy statement.

Rajnish Kumar, Chairman, SBI said, "The decision in allowing subsidiaries of Indian banks abroad to refinance AAA rated corporates will provide a fair and just opportunity to Indian banks to book and retain good quality assets.”
 
ECBs are loans sanctioned by non-resident lenders to Indian borrowers like corporates or public sector undertakings (PSU) in the form of foreign currency. The ECBs involve commercial bank loans, buyers' credit, suppliers' credit, securitized instruments such as floating rate notes and fixed rate bonds etc.
 
The DEA (Department of Economic Affairs), Ministry of Finance, government of India along with Reserve Bank of India, monitor and regulate ECB guidelines and policies.
 
Meanwhile, the RBI will issue a revised guideline within a week.