The RBI allowed core investment companies to raise external commercial borrowing (ECB) for projects floated as special purpose vehicle in order to strengthen the flow of resources into the infrastructure sector. They will be allowed to raise funds via ECBs with certain riders, the RBI said in a notification. "In order to strengthen the flow of resources to infrastructure sector, it has been decided to permit holding companies/core investment companies (CICs) coming...to raise ECB under the automatic route/approval route, as the case may be, for project use in Special Purpose Vehicles (SPVs)," RBI said.

The RBI said the business activity of the SPV should be in the infrastructure sector and the infrastructure project is required to be implemented by the SPV established exclusively for implementing the project. Also, the ECB proceeds should be utilised either for fresh capital expenditure or for refinancing of existing rupee loans.

RBI said that the ECB for the SPV can be raised up to three years after the commercial operations date of the SPV and the SPV should give an undertaking that no other method of funding, such as, trade credit will be utilised for that portion of fresh capital expenditure financed through ECB proceeds.

The regulator also said that the ECB proceeds should be kept in a separate escrow account. While, for holding companies, the ECB availed should be within the ceiling of leverage stipulated for CICs. For CICs having asset size below Rs 100 crore, the ECB availed of should be on fully hedged basis, it added further. "The above modifications to the ECB guidelines will come into force with immediate effect," RBI said. (Money Control)