Mumbai: The RBI on Thursday allowed companies participating in the insolvency process to raise funds through external commercial borrowing (ECB) for repaying existing lenders.
The central bank said the resolution applicants under the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016 may find it attractive to borrow abroad to repay the existing lenders.
In order to facilitate that ”it is proposed to relax the end-use restrictions under the approval route of the ECB framework for resolution applicants under CIRP and allow them to utilise the ECB proceeds for repayment of rupee term loans of the target company," the RBI said in a statement.
RBI Governor Shaktikanta Das, while addressing the media on Thursday, said, “Our decision gives no room to fly-by-night operator to bring in money just for the sake of bringing in money. There are other openings of bringing in money, we have ECB route, we have the FPI (foreign portfolio investor) route,” Das said.
It's a well-regulated process and only those companies that have been identified under the resolution process will be able to tap this route, he said.
Guidelines in this regard will be issued by the end of this month. Under the existing guidelines, the proceeds of ECB denominated in either foreign currency or the Indian rupee are not permitted to be utilised for repayment or for on-lending for repayment of domestic rupee loans....