Existing all-in-cost ceiling for ECBs, trade credit stays

The Reserve Bank of India (RBI) has decided to continue with the enhanced all-in-cost ceiling for external commercial borrowings (ECB) for a further six month period. The all-in-cost ceiling for ECBs with average maturity of three years and up to five years was enhanced to six months Libor plus 350 basis points with effect from November 23, 2011. For more than five years it was raised to six months Libor plus 500 basis points. This was done in the wake of developments in the global financial markets and following difficulties experienced by borrowers in raising ECBs within the existing all-in-cost ceiling. On a review, the apex bank has decided to continue with the enhanced all-in-cost ceiling for a further period of six months. The all-in-cost ceiling, however, will be applicable up to September 30, 2012. It will be reviewed thereafter. All other aspects of ECB policy, will remain unchanged, says RBI. The global developments also forced the RBI to take a kinder view of the problems faced by domestic importers in raising trade credit within the existing all-in-cost ceiling. Accordingly, the all-in-cost ceiling for trade credit was enhanced to 6 months Libor plus 350 basis points with effect from November 15, 2011. On a review, the apex bank has decided to continue with the enhanced all-in-cost ceiling for trade credits too for a further six months time. The all-in-cost ceiling will include arranger fee, upfront fee, management fee, handling / processing charges, out-of-pocket and legal expenses, if any. The all-in-cost ceiling is applicable up to September 30, 2012 and will be reviewed thereafter. Keywords: Reserve Bank of India, ECBs, trade credit