Reserve Bank of India (RBI) allowed Non-banking finance companies (NBFCs) categorised as Asset Finance Companies (AFCs) to avail of external commercial borrowing (ECB).
But the central bank imposed certain conditions for such NBFCs to access ECB window. One of the condition is that they would avail ECB under the automatic route with minimum average maturity of five years. Further, the funds raised through the ECB route must be used for financing import of infrastructure equipment for leasing to infrastructure projects.
Further, these companies can raise ECB through foreign currency bonds (FCB) only from those countries, where regulations are complaint with Financial Action Task Force (FATF) guidelines.
Such ECBs can be availed up to 75 per cent of owned funds of NBFC-AFCs, subject to a maximum of $200 million or its equivalent per financial year.
Also, ECBs by AFCs above 75 per cent of their owned funds will be considered under the approval route and currency risk of such ECBs is required to be fully hedged.
Meanwhile, the RBI also allowed NBFC-Infrastructure Finance Companies (IFCs) to avail of ECB for on-lending to infrastructure sector both under automatic and approval routes.