Mumbai: To strengthen the flow of resources to the infrastructure sector, the Reserve Bank of India has permitted holding companies / core investment companies to raise resources via the external commercial borrowing (ECB) route.
The ECB should be for project use in special purpose vehicles (SPVs), subject to terms and conditions.
Among the terms and conditions, the RBI specified that the business activity of the SPV should be in the infrastructure sector; and the infrastructure project is required to be implemented by the SPV established exclusively for implementing the project.
Further, the ECB proceeds should be utilised either for fresh capital expenditure (capex) or for refinancing of existing rupee loans (under the approval route) taken from the domestic banking system for capex.
ECB for the SPV can be raised up to three years after the commercial operations date of the SPV.
The SPV should give an undertaking that no other method of funding, such as trade credit (if for import of capital goods), will be utilised for that portion of fresh capital expenditure financed through ECB proceeds.
In the case of holding companies that come under the RBI’s core investment company (CIC) regulatory framework, the central bank has specified additional terms and conditions for raising ECB for project use.
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