On November 6, 2018, the Reserve Bank of India issued to all Category-I Authorized Dealer Banks a circular on “External Commercial Borrowings (“ECBs”) Policy – Review of Minimum Average Maturity and Hedging Provisions” (“Circular”).
Following are the key changes brought about by the Circular:
i. Minimum average maturity: the average maturity requirement for ECBs in the infrastructure space raised by eligible borrowers has been reduced from 5 (five) years to 3 (three) years.
ii. Hedging requirements: the average maturity requirement has been reduced from 10 (ten) years to 5 (five) years for exemption from mandatory hedging provision applicable to ECBs in the infrastructure space raised by eligible borrowers. Accordingly, the ECBs with minimum average maturity period of 3 (three) to 5 (five) years in the infrastructure space will have to meet 100% (one hundred percent) mandatory hedging requirement. The circular clarified that ECBs falling under the aforesaid revised provision but raised prior to the date of this circular will not be required to mandatorily roll-over their existing hedges.
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