Question: Which among the following statement is false regarding the term ECB appeared in a recent RBI decision?
(a) ECB in full is known as External Commercial Borrowing
(b) ECBs are commercial loans raised by eligible resident entities from recognised lenders, except foreign branches/overseas subsidiaries of Indian banks.
(c) Reserve Bank of India relaxed the end-use restrictions related to external commercial borrowings (ECBs)
(d) It will allow corporates and non-banking finance companies (NBFCs) to raise ECBs for Human capital
Answer: (d)
Related facts:
- Reserve Bank of India has relaxed the end-use restrictions related to external commercial borrowings (ECBs).
- The purpose of this relaxation is to allow corporates and non-banking finance companies (NBFCs) to raise ECBs for working capital and general corporate purposes.
- It should be known that ECBs are commercial loans raised by eligible resident entities from recognised lenders, except foreign branches/overseas subsidiaries of Indian banks.
- This has been done by the apex bank in consultation with the government of India in a bid to give a leg-up to the slowing economy of the country.
- Under the revised ECB policy, long-term overseas borrowing will enable NBFCs, especially housing finance companies, overcome asset-liability mismatches and liquidity stress faced by them.
- The RBI stated that eligible corporate borrowers will be allowed to avail ECB for repayment of rupee loans availed domestically for capital expenditure.
- The condition is that the loan should be for capital expenditure in manufacturing and infrastructure sector and must be classified as SMA-2, or NPA, under any one-time settlement with lenders.