RBI allows hotels to prepay loans through ECBs

Indian companies in the hotel sector (with a total project cost of Rs 250 crore or more), irrespective of their geographical location, have been allowed to tap the external commercial borrowing (ECB) route.

The ECBs will be for repayment of outstanding rupee loan(s) and/or for fresh rupee capital expenditure.

The Reserve Bank of India, in a notification, said the abovementioned companies are eligible borrowers under the ECB policy for repayment of rupee loans and/or fresh rupee capital expenditure.

As per the extant guidelines, only Indian companies in the manufacturing and infrastructure sectors, which are consistent foreign exchange earners, are allowed to go in for ECBs for repayment of outstanding rupee loan(s) taken from the domestic banking system and/or for fresh rupee capital expenditure.

In September 2012, the RBI had enhanced the maximum permissible limit of ECB for an individual company. The limit was set at 75 per cent of the average foreign exchange earnings realised during the immediate past three financial years or 50 per cent of the highest foreign exchange earnings realised in any of the immediate past three financial years, whichever is higher.

Prior to the enhancement, the maximum permissible ECB was limited to 50 per cent of the average annual export earnings realised during the past three financial years.

The maximum ECB by an individual company or group, as a whole, is restricted to $3 billion.