Companies rated investment grade locally can make use of the central bank’s relaxed rules on external commercial borrowings, the Reserve Bank of India (RBI) said Monday, giving further regulatory clarity on creditworthiness eligibility for availing of this limited-period offer.
The special dispensation will expand the universe of local borrowers seeking to tap the global money hubs for funds.
“The enhanced all-in-cost ceiling shall be available only to eligible borrowers of investment grade rating from Indian Credit Rating Agencies (CRAs),” the RBI had said on July 11, when it doubled a local company’s borrowing limit to $1.5 billion via the external commercial borrowing mechanism under the automatic route.
Several foreign lenders engaged in raising overseas loans and bonds for Indian companies earlier sought clarity from the RBI on whether the revised rules on higher offshore borrowing will apply only to globally higher-rated firms, ET reported on July 11. Such a criterion threatened to limit the number of potential beneficiaries.
“The all-in cost ceiling under the ECB framework is also being raised by 100 basis points, subject to the borrower being of investment grade rating,” the RBI said Monday.
This threshold is currently capped at 5 percentage points. Eased rules will be in force only up to December 31.
A top-rated company globally can price bonds or loans with a spread in the range of 100-200 basis points depending on its brand, said dealers. One basis point is 0.01%.
However, a company rated high-yield by overseas rating agencies needs to offer much higher to draw global banks/investors.