Mumbai : Relaxing norms for external borrowings, the RBI allowed ECB lenders can now extend loans in Indian Rupees to domestic businesses. “With a view to providing greater flexibility for structuring of external commercial borrowings (ECB) arrangements, it has been decided that recognised non-resident ECB lenders may extend loans in Indian rupees,” the RBI said in a notification.
RBI further said for lending in rupees, the lender would have to follow certain norms, including currency swaps with authorised banks. Also, the all-in-cost of such ECBs should be commensurate with prevailing market conditions. The apex bank said that for executing swaps for ECBs denominated in rupees, the lender could also set up a representative office in India.
Fund raised from overseas in domestic currency will help Indian companies to deal with risks associated with currency fluctuation.