Dec 31, 2021RBI Notifies Changes to ECB and TC Framework Relating to Use of ARR
The RBI, on December 8, 2021, in view of the impending cessation of London Interbank Offered Rate (‘LIBOR’) as a benchmark rate, made the following changes to the all-in-cost (‘AIC’) benchmark and ceiling for foreign currency (‘FCY’) external commercial borrowings (‘ECBs’) and trade credits (‘TCs’), and clarified that there will be no change in the AIC benchmark and ceiling for INR denominated ECBs or TCs:
i. The benchmark rate can be any widely accepted interbank rate or alternative reference rate (‘ARR’) of six month tenor, applicable to the currency of borrowing;
ii. The AIC ceiling for new FCY ECBs is 500 basis points (‘bps’), and for new FCY TCs is 300 bps over the relevant benchmark rates; and
iii. The AIC ceiling for existing ECBs and TCs linked to LIBOR whose benchmarks are changed to ARRs, has been revised to 550 bps and 350 bps, respectively, over the ARR.