Currently, overseas branches/subsidiaries of Indian banks are not permitted to extend such refinance.
International or overseas branches of banks will soon be permitted to refinance external commercial borrowings (ECB) of AAA-rated corporates as well as Navratna and Maharatna PSUs.
Currently, Indian corporates are permitted to refinance their existing External Commercial Borrowings (ECBs) at a lower all-in-cost. However, overseas branches/subsidiaries of Indian banks are not permitted to extend such refinance.
“In order to provide a level playing field, it has been decided, in consultation with the Government, to permit the overseas branches/subsidiaries of Indian banks to refinance ECBs of AAA rated corporates as well as Navratna and Maharatna PSUs, by raising fresh ECBs,” Reserve Bank of India deputy governor BP Kanungo said at the RBI policy review press meet.
Kanungo added the revised guidelines regarding this will be issued within a week.
Over the years, particularly after the financial crisis of 2008, lower interest rates abroad and higher interest rates at home have pushed Indian corporates to increase the share of external commercial borrowings in their total external debt. It is estimated that Indian borrowers would bring down their borrowing cost by 20-50 basis points if and when they refinance their existing ECBs.However, since the right to extend refinance for existing ECBs is currently limited to home branches of Indian banks, there was a need to let overseas bank branches do the same in order to take advantage of their presence there.