RBI Allows Infra Companies To Raise Yuan-Denominated Debt

In an attempt to boost capital inflows in the infrastructure sector, RBI has allowed Infra companies to to raise Chinese yuan-denominated debt, through the approval route. RBI has also raised the borrowing limit for companies.

However, once approved the approval of the Reserve Bank will be valid for a period of three months from the date of issue of the approval letter and the loan agreement should be executed within the validity period.

RBI has also relaxed for infrastructure companies with direct foreign equity up to 25% to raise fund overseas without government permission. Direct foreign equity holder (holding minimum 25% of the paid-up capital) and indirect foreign equity holder holding at least 51% of the paid-up capital, will be permitted to provide credit enhancement for the domestic debt raised by Indian companies engaged exclusively in the development of infrastructure through issue of capital market instrument.

The company fulfilling foreign equity criteria does not require permission for raising ECB up to $5Mn.

Now onwards the term debt in the debt-equity ratio will be replaced with ECB liability and the ratio will be known as ECB liability-equity ratio to make the term signify true position as other borrowings or debt are not considered in working out this ratio.

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