RBI Stops Banks From Extending Ecbs For Repaying Rupee Loans
MUMBAI: The Reserve Bank of India disallowed overseas branches of domestic banks from extending external commercial borrowings (ECBs) to manufacturing and infrastructure companies for repaying rupee loans.
"If the ECB is availed from overseas branches or subsidiaries of Indian banks, the risk remains within the Indian banking system," the RBI said in a notification.
"It has, therefore, been decided that repayment of rupee loans availed of from domestic banking system through ECBs extended by overseas branches or subsidiaries of Indian banks will, henceforth, not be permitted," the central bank said.
Manufacturing and infrastructure firms had been allowed to avail of ECBs to repay rupee loans from the domestic banking system and for fresh rupee capital expenditure under the approval route.
Further, the RBI said banks and their overseas units should not issue credit guarantees for overseas subsidiaries of Indian companies seeking to raise loans from other entities, expect for business needs.
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