The Hindu Business Line : Bar on ECB use for developing integrated townships

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Bar on ECB use for developing integrated townships

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New Delhi May 18 The Government on Friday disallowed use of external commercial borrowing (ECB) proceeds in development of integrated townships.

This has been done through a modification in the ECB policy of the Government after consultation with the Reserve Bank of India.

As per the existing ECB policy, utilisation of ECB proceeds for real estate is not permitted. However, the "real estate" definition excluded "development of integrated township".

To modulate the capital inflows through ECBs, the Government has now decided to withdraw the exemption accorded to `development of integrated township' as a permissible end-use of ECB.

In another modification of the ECB policy, the Government has revised the all-in-cost ceilings (interest rate ceiling) over six-month London Interbank Offered Rate (LIBOR) for ECBs.

Consequently, ECBs for average maturity period of three to five years would have the all-in-cost ceiling of 150 basis points over LIBOR against the earlier ceiling of 200 basis points over LIBOR.

In case of maturity over five years, the new ceiling is 250 basis points per annum against earlier ceiling of 350 basis points. The ceilings have been revised in view of the upgradation of the country's sovereign credit ratings. These changes would apply to ECBs under both the automatic route and approval route.

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