No.CLE-HO /Pol/RBI /13-1

Aug. 2, 2013

Members of the Council

Sub : External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

Dear Member

As members are aware, Trade Credits’ refer to credits extended for imports directly by the overseas supplier, bank and financial institution for maturity of less than three years. Depending on the source of finance, such trade credits include suppliers’ credit or buyers’ credit. Suppliers’ credit relates to credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside India for maturity of less than three years. Buyers’ credit and suppliers’ credit for three years and above come under the category of External Commercial Borrowings (ECB) which is governed by ECB guidelines.

Considering the developments in the global financial markets and the fact that borrowers were experiencing difficulties in raising ECBs within the existing all-in-cost ceiling, RBI enhanced the all-in-cost ceiling for ECBs with average maturity of three and up to five years was enhanced to 6 months Libor + 350 bps with effect from November 23, 2011, subject to review on March 31, 2012.

Vide its circular No.99 dt.30th March 2012, RBI decided to continue with the enhanced all-in-cost ceiling for a further period of six months in respect of ECBs as under:
Average Maturity Period  All-in-cost over 6 month LIBOR*
Three years and up to five years 350 bps
More than five years 500 bps
* for the respective currency of borrowing or applicable benchmark

The RBI subsequently issued a circular No. 60 dated Dec. 14, 2012 stating that the all-in-cost ceiling as specified in A.P. (DIR Series) Circular No. 99 dated March 30, 2012 will continue to be applicable till March 31, 2013 and subject to review thereafter.

The RBI has now issued a Circular A.P. (DIR Series) Circular No.11 dated July 11, 2013 stating that the all-in-cost ceiling as specified in A.P. (DIR Series) Circular No. 99 dated March 30, 2012 will continue to be applicable till September 30, 2013 and is subject to review thereafter.

Members may kindly take note of the above.
With regards

R Ramesh Kumar, IAS
Executive Director
Council for Leather Exports

A.P. (DIR Series) Circular No.11 || A. P. (DIR Series) Circular No. 99