What changed
Previously, IFCs could avail ECBs up to 50% of owned funds under automatic route, and above that under approval route without explicit leverage ratio certification. Now, AD Category-I banks must certify the leverage ratio of IFCs when forwarding approval-route ECB proposals to RBI. All other ECB policy aspects remain unchanged.
What it means for you
Banks acting as AD Category-I must now verify and certify the leverage ratio of IFCs before submitting ECB applications under the approval route. This increases due diligence burden on banks but ensures better risk assessment for higher ECB exposures. IFCs seeking ECBs above 50% of owned funds will face additional scrutiny from their designated bank.
What you must do
- Update internal processes to include leverage ratio certification for IFC ECB proposals under approval route.
- Train staff on calculating and certifying outside liabilities/owned funds ratio for IFCs.
- Ensure all IFC ECB applications above 50% of owned funds include certified leverage ratio before forwarding to RBI.
- Review existing IFC relationships to identify any pending or future approval-route ECB requests.
Who it affects
AD Category-I banks handling ECB proposals for IFCs, Infrastructure Finance Companies (IFCs) seeking ECBs above 50% of owned funds, RBI's ECB approval processing team
What is the leverage ratio that AD banks must certify?
The leverage ratio is defined as outside liabilities divided by owned funds. AD Category-I banks must certify this ratio for IFCs when forwarding ECB proposals under the approval route.
Does this circular change the automatic route limit for IFC ECBs?
No, the automatic route limit remains unchanged at 50% of owned funds. The new certification requirement applies only to ECB proposals under the approval route, i.e., above 50% of owned funds.
Are there any other changes to ECB policy for IFCs?
No, all other aspects such as eligible borrower, recognised lender, maturity, all-in-cost, end-use, prepayment, refinancing, and reporting remain unchanged as per existing guidelines.