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Reserve Bank of India amends Master Direction on External Commercial Borrowing

The Reserve Bank of India (“RBI”) vide it’s A.P. (DIR Series) Circular No.11 (“Circular”) dated August 01, 2022 pertaining to liberalization of External Commercial Borrowings (“ECB(s)”) amended the Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations, 2019 (hereinafter referred as “Master Direction, 2019”) which supersedes the Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers, 2016. 

The liberalization measures with regards to the ECB framework vide the aforesaid Circular and Master Direction, 2019 are encapsulated as follows:

  • The automatic route limits for ECB borrowers extant under paragraph number 2.2 prior to amendment to the Master Direction, 2019 denote a threshold of USD 750 million or equivalent per financial year. However, the borrowings under the automatic route must conform necessarily with the all-in cost ceiling amidst the ECB framework pursuant to the Master Direction 2019.
  • Additionally, in accordance with the RBI Press Release: 2022-2023/481, ‘Liberalisation of Forex Flows’ released on July 06, 2022, paragraph number 5 captures the increased automatic route limit to USD 1.5 billion or equivalent from the prevailing USD 750 million or equivalent per financial year. This RBI measure vide the Press Release upon consultation with the Central Government, expects the augmentation of forex inflows and for an overall ‘macroeconomic financial stability’ and shall be effective for ECBs raised up to December 31, 2022. 
  • Subject to the borrower investment rating grade assigned by Indian Credit Rating Agencies (CRAs), the all-in cost ceiling under the ECB have been marked up by 100 basis points for all ECBs raised till December 31, 2022. However, the other borrowers eligible for ECBs must conform to the existing all-in cost ceiling as under paragraph 2.1(vi) of the Master Direction, 2019. Further, kindly note that amendment to the Master Direction, 2019 and the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 with regards to the all-in cost ceiling and the automatic route threshold have been duly incorporated as per the abovementioned Circular read with the RBI Press Release: 2022-2023/481.


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