A.P. (DIR Series) Circular No.11
All Category-I Authorised Dealer
Madam / Sir
Commercial Borrowings (ECB) Policy – Review of Minimum Average Maturity and
Attention of Authorized Dealer
Category-I (AD Category-I) banks is invited to paragraphs 2.4.1, 2.4.2 and
2.5 of Master Direction No.5 dated January 1,
2016 on “External Commercial Borrowings, Trade Credit,
Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons
other than Authorised Dealers”, as amended from time to time, in terms of
which certain eligible borrowers raising foreign currency denominated ECBs
under Track I, having a minimum average maturity requirement of 5 years,
are mandatorily required to hedge their ECB exposure fully.
2. The extant provisions have
been reviewed and it has been decided, in consultation with the Government
of India, to amend the following provisions of the ECB framework:
i. Minimum average maturity: Reduce the minimum average maturity requirement
for ECBs in the infrastructure space raised by eligible borrowers under
paragraph 2.4.2 (vi) of the aforesaid Master Direction from 5 years, as
stipulated under paragraph 2.4.1(iv), to 3 years; and
ii. Hedging requirements: Reduce the average maturity requirement from extant
10 years to 5 years for exemption from mandatory hedging provision
applicable to ECBs raised by above referred eligible borrowers.
Accordingly, the ECBs with minimum average maturity period of 3 to 5 years
in the infrastructure space will have to meet 100% mandatory hedging
requirement. Further, it is also clarified that ECBs falling under the
aforesaid revised provision but raised prior to the date of this circular
will not be required to mandatorily roll-over their existing hedges.
3. All other provisions of the
ECB policy remain unchanged. AD Category - I banks should bring the
contents of this circular to the notice of their constituents and
4. The aforesaid Master Direction No. 5 dated January 01, 2016 is
being updated to reflect the changes.
5. The directions contained in
this circular have been issued under section 10(4) and 11(2) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and are without prejudice to
permissions / approvals, if any, required under any other law.
Chief General Manager-in-Charge