The Reserve Bank of India (RBI), banking sector regulator in India has relaxed External Commercial Borrowing (ECB) framework to attract flow of funds from abroad. ECB is a major tool to calibrate the policy towards capital account management in response to evolving macro-economic situation.

A more liberal approach, with fewer restrictions on end uses, higher all-in-cost ceiling, etc., are some overarching principles of the revised framework. Similarly, a more liberal approach for Indian Rupee (INR) denominated ECBs where the currency risk is borne by the lender and expansion of the list of overseas lenders to include long term lenders like sovereign wealth funds, pension funds, insurance companies has been included in the revised frame work.

The RBI has raised the limit for small value ECBs with Minimum Average Maturity (MAM) of 3 years to USD 50 million from the existing USD 20 million; and alignment of the list of infrastructure entities eligible for ECB with the harmonised list of the Government of India.

The revised ECB framework will comprise of medium term foreign currency denominated ECB with MAM of 3-5 years; long term foreign currency denominated ECB with MAM of 10 years and Indian Rupee denominated ECB with MAM of 3-5 years.

The RBI has issued the operational guidelines for the revised framework under FEMA, 1999. A transitional period upto Mar. 31, 2016 has been allowed to ECBs contracted till commencement of the revised framework and in respect of special schemes which are to end by Mar. 31, 2016.