The Reserve Bank of India (“RBI”), vide a circular dated February 7, 2019 (“Circular”), has relaxed the end-use restrictions stipulated in the circular dated January 16, 2019, issued by RBI, on ‘External Commercial Borrowings (ECB) Policy – New ECB Framework’ (“ECB Framework”), for utilization of external commercial borrowings.
Paragraph 2.1(viii) of the ECB Framework, prohibits the utilization of proceeds raised under the ECB Framework for repayment of domestic rupee loans except when raised from a foreign equity holder. Pursuant to the Circular, an eligible resolution applicant under the Insolvency and Bankruptcy Code, 2016 (“Code”), who is an eligible borrower as per the ECB Framework, is permitted, under the approval route, to utilize the funds raised in accordance with the ECB Framework from the recognized lenders (except branches/ overseas of subsidiaries of Indian banks), for repayment of rupee term loans of a target company undergoing the corporate insolvency resolution process under the Code. A resolution applicant under the Code can forward such proposals to raise external commercial borrowings through their authorized dealer bank to RBI for approval.
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