What changed
Previously, entities in hotels, hospitals, and software sectors could only access ECB up to USD 100 million per financial year under the Automatic Route. Now, RBI will consider applications for ECB exceeding USD 100 million under the Approval Route, for foreign currency or rupee capital expenditure for permissible end-uses, with the condition that proceeds cannot be used for land acquisition.
What it means for you
Banks can now facilitate larger ECB deals for these service sector clients, but each case above USD 100 million needs prior RBI approval. This opens up more funding options for expansion and capex, though lenders must ensure end-use compliance, especially the land acquisition ban. The existing ECB norms on borrower, lender, cost, maturity, and reporting remain unchanged.
What you must do
- Inform your corporate clients in hotels, hospitals, and software sectors about the new Approval Route for ECB above USD 100 million.
- Ensure that any ECB application above the automatic limit includes a clear end-use declaration excluding land purchase.
- Continue to process ECB up to USD 100 million under the Automatic Route as per existing guidelines.
- Advise clients to prepare detailed project reports for RBI approval when seeking higher ECB amounts.
Who it affects
AD Category-I banks, Hotels, hospitals, and software companies seeking ECB, Corporate borrowers in eligible service sectors
Can a hospital now borrow USD 150 million via ECB?
Yes, but only under the Approval Route. The application must be made to RBI, and the funds cannot be used for land acquisition.
Does this change affect the all-in-cost ceiling or maturity norms?
No, all other ECB norms including all-in-cost ceiling, average maturity, and reporting requirements remain the same as before.