What changed
Previously, refinancing an existing ECB required the fresh ECB to have a lower all-in-cost. Now, borrowers can raise a fresh ECB or reschedule an existing one at a higher all-in-cost, subject to the approval route, as long as the enhanced cost does not exceed the prescribed ceiling.
What it means for you
Banks facilitating ECB refinancing must now process applications under the approval route when the new cost is higher. This gives borrowers more flexibility to manage debt, but lenders need to ensure compliance with all-in-cost ceilings and obtain RBI approval before proceeding.
What you must do
- Update internal ECB processing guidelines to route higher-cost refinancing/rescheduling through the approval route.
- Verify that the enhanced all-in-cost does not exceed the prescribed ceiling before submitting applications to RBI.
- Advise corporate clients about the new flexibility and the need for RBI approval for higher-cost refinancing.
- Monitor all other ECB policy aspects remain unchanged and ensure adherence.
Who it affects
Category-I Authorised Dealer Banks, Borrowers with existing ECBs seeking refinancing or rescheduling, Corporate treasuries managing external commercial borrowings
Can we refinance an existing ECB at a higher interest rate without RBI approval?
No, any refinancing or rescheduling at a higher all-in-cost must go through the approval route. Only lower-cost refinancing remains under the automatic route.
What is the all-in-cost ceiling for ECB refinancing under this circular?
The circular does not specify a numeric ceiling; it refers to the all-in-cost ceiling prescribed as per extant guidelines. You must refer to the current ECB master directions for the applicable ceiling.