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The department of telecom has revised the bank guarantee requirement for telecom operators to 20%, effectively slashing the requirement by almost 80%, a notification by the regulator said.

This decision will result in higher cash flows for telcos like Vodafone Idea and Bharti Airtel. It will also give more leeway for banks to lend more to the debt-ridden companies in the future.

Under the amended norms, telecom operators will be required to provide a performance bank guarantee of up to 44 crore for each service for the telecom licence compared to 220 crore mandated under the old rule.

Similarly, telecom operators will need to provide a financial bank guarantee of maximum 8.8 crore per circle now, against the previous requirement of 44 crore.

The rule will not be applicable in cases where bank guarantees have been furnished due to any court order or are subject to any litigation, the licence amendment note said. The rules will not apply to telecom operators, who are currently going through the liquidation process.

However, the amended rationalisation of bank guarantees are subject to revisions. For instance, the existing bank guarantees furnished or required due to any court order or litigation will continue.

In a series of reforms to ease financial burden on the telecom sector, the government has also earlier amended licence norms to rationalise the interest rate for delayed payment of licence fee.

Earlier today, the government notified its decision to permit 100% foreign direct investment (FDI) under automatic route in the struggling telecom sector.

According to reports, the government is also considering withdrawing legal cases against telecom companies, involving disputes of about 40,000 crore.

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