Hedging exemption norms also relaxed
MUMBAI: The Reserve Bank of India (RBI) has reduced the minimum maturity requirement for external commercial borrowings (ECBs) in the infrastructure space from the present five years to three years.
“The extant provisions have been reviewed and it has been decided, in consultation with the Government of India, to amend certain provisions of the ECB framework,” the RBI said in a statement.
Likewise, the average maturity requirement for ECBs in order to get exemption from mandatory hedging has also been substantially reduced.
“RBI has decided to reduce the average maturity requirement from extant 10 years to 5 years for exemption from mandatory hedging provision applicable to ECBs raised by eligible borrowers,” the RBI statement on hedging added.
Accordingly, the ECBs with minimum average maturity period of 3 to 5 years in the infrastructure space will have to meet 100 per cent mandatory hedging requirement.
However, the ECBs falling under the revised provision but raised funds prior to the RBI decision (on Nov 6) will not be required to mandatorily roll-over their existing hedges.