The Reserve Bank of India (RBI) on Thursday further relaxed norms governing external commercial borrowings (ECBs) for infrastructure companies by allowing them to avail of take-out financing through such forex loans.
This relaxation was applicable to companies involved in seaport, airport, road and power sectors, RBI said.
“It has been decided to permit take-out financing arrangement through ECB, under the approval route, for refinancing of rupee loans availed of from domestic banks by eligible borrowers,” said RBI.
The company developing the infrastructure project must have a tri-partite agreement with domestic banks and overseas lenders for take-out of the loan, RBI said. The loan must have a minimum tenure of seven years.
Domestic banks involved in the transaction would be governed by norms related to take-out financing and would not be allowed to guarantee such financing, RBI said.
After the take-out, the residual loan to be taken out by the overseas lender would be considered as an external commercial borrowing, the central bank said.
“All other aspects of the ECB policy, such as the $500-million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB, and reporting arrangements remain unchanged,” RBI said.
IIFCL may tweak takeout norms
India Infrastructure Finance Co Ltd is mulling changes in takeout financing guidelines in a bid to make them attractive for banks and project developers. The state-owned infrastructure financing company was likely to ink the first pact under the scheme next month, Chief Executive Officer Pradeep Kumar said.
IIFCL has received “feedback” relating to the quantum of takeout financing it can provide to banks and the fees to be paid by them. According to the current guidelines, IIFCL will provide takeout financing to individual commercial banks to the extent of 75 per cent of the residual amount of the loan.
However, the total takeout amount cannot exceed 50 per cent of the total residual loan of the infrastructure project. Also, the lenders will have to pay a fee not exceeding 0.3 per cent per annum of the takeout amount to IIFCL. “We have got suggestions on various things. Some lenders want to offload the entire 100 per cent (of the residual amount of loan). Others have said they don’t want to pay any takeout fees,” Kumar said.
“The first project under takeout financing will either be in road or power sector,” he said.
