Mumbai: The Reserve Bank on Monday said external commercial borrowings (ECBs) extended to financially distressed companies will fall under restructuring head if borrowers use it to refinance rupee loans.
"The refinance shall be treated as 'restructuring' if borrowings/export advances are extended to a borrower who is under financial difficulty and involve concessions that the bank would otherwise not consider," RBI said in a notification.
In a directive, RBI said the facility of long term export advances is primarily being utilised for refinancing rupee loans of borrowers instead of execution of long term supply contracts for export of goods.
"In order to ensure that long term export advances are used for intended purpose, it is advised that while eligible Indian companies may continue to avail of the facilities available to them, any repayment/refinancing of rupee loans with foreign currency borrowings/export advances, where permitted, will be subject to conditions," RBI said.
RBI said Indian companies may continue to avail of such loans if it is not secured from Indian lenders, including from their overseas branches or subsidiaries.
Also, they should not secure any help from Indian banks in the form of guarantees or Standby Letters of Credit or Letters of Comfort.
However, in cases of permissible category, banks can use ECBs to repay rupee loans if loans are taken from Indian lenders or with their support, RBI added.
Indian companies are not permitted to raise ECB from overseas branches or subsidiaries of Indian banks to refinance or repay rupee loans raised from domestic banks.
