Mumbai: The Reserve Bank of India (RBI), on Wednesday allowed telecommunications companies to use external commercial borrowings (ECBs) to pay for spectrum allocation but withdrew the special relaxation in the interest rates that a company can offer overseas creditors.
It also banned companies from buying back their foreign currency convertible bonds (FCCBs), effective 1 January, given the prevailing macroeconomic conditions and global developments, especially the improvements in stock prices.
Earlier, RBI had allowed the raising of ECBs for obtaining licences or permits for 3G spectrum. Now RBI is also allowing eligible borrowers to pay for the mobile phone frequencies allocated to them.
RBI dispensed with the “all-in-cost” ceilings for ECBs in September 2008 to help companies raise funds abroad as overseas funds became expensive. RBI withdrew the facility in view of the “improvement in the credit market conditions and narrowing credit spreads in the international markets.”
Following the withdrawal, companies can now offer a maximum of six-month Libor (London interbank offered rate) plus 3% for loans of three years and up to five years. For loans above five years, companies can offer a maximum of six-month Libor plus 5%. The six-month Libor rate presently is at 0.462%. Earlier, the companies could offer any spread above Libor if they had RBI approval.