This announcement is viewed as a special provision to accelerate the resolution under the IBC, as RBI had not permitted foreign funds to repay rupee loans in the new ECB guidelines announced last monthNew Delhi: With an aim to smoothen the resolution process under the Insolvency and Bankruptcy Code (IBC), the Reserve Bank of India plans to allow bidders to raise funds through external commercial borrowings (ECBs) to repay existing lenders. This announcement is being viewed as a special provision to accelerate the resolution under the IBC, as RBI had not permitted foreign funds to repay rupee loans in the new ECB guidelines announced last month.
But now bidding companies can raise foreign currency funds via foreign banks abroad and use these proceeds to repay rupee loans, RBI said.
Relaxation of ECB framework
“The resolution applicants under Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code (IBC), 2016 may find it attractive to borrow abroad to repay the existing lenders,” RBI said.
“In view of the above, it is proposed to relax the end-use restrictions under the approval route of the ECB framework for resolution applicants under the CIRP and allow them to utilise the ECB proceeds for repayment of Rupee term loans of the target company.”
Such ECBs could be availed from all eligible lenders under the extant ECB framework, except for overseas branches/subsidiaries of Indian banks, the RBI release said, adding that guidelines in this regard will be issued by the end of this month.
SBI Chairman Rajnish Kumar said the ECB route for applicants under the IBC could facilitate the resolution process.
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