Successful bidders in the 2G auction will be allowed to avail of ECB under the automatic route from their ultimate parent company without any maximum ECB liability-equity ratio
Mumbai: The Reserve Bank of India (RBI) has relaxed norms allowing telecom companies to raise long term funds from overseas to refinance domestic loans taken by them to pay for 2G spectrum, a move that will help the stressed sector, reports PTI.
"The successful bidders making the upfront payment for the award of 2G spectrum initially out of Rupee loans availed of from the domestic lenders would be eligible to refinance such Rupee loans with a long-term external commercial borrowing (ECB), under the automatic route," the RBI said in a notification.
The relaxation in ECB norms, the RBI said, has been made keeping in view the "large outlay of funds required to be paid directly" to the government within a limited period of time.
The central bank further said that the successful bidders in the 2G auction will be allowed to avail of ECB under the automatic route from their ultimate parent company without any maximum ECB liability-equity ratio.
However, the ECB can be availed of from the parent company if the lender holds minimum paid-up equity of 25% in the borrower company, either directly or indirectly.
Further, the successful bidders can avail of short term foreign currency loan in the nature of bridge finance under the automatic route for the purpose of making upfront payment towards 2G spectrum allocation and replace the same with a long term ECB under the automatic route, RBI added.
"The relaxations in respect of the ECB liability-equity ratio, percentage of shareholding by the ultimate parent, refinancing of Rupee loans and bridge finance are part of a special dispensation applicable only to the successful bidders in the upcoming 2G spectrum auction," the RBI added.
The recent auction for 1800 MHz band got total bids worth Rs9,407.64 crore, just one-third of the minimum Rs 28,000 crore that the government had expected.
Telenor, Videocon and Idea Cellular were among the winners of spectrum in the recent auction. .
All other aspects of ECB policy, such as $750 million limit per company per financial year under the automatic route, end-use, average maturity period and reporting arrangements remain unchanged.
As per the extant policy, RBI added that the eligible borrowers in the telecom sector are permitted to avail of ECB for the purpose of payment for spectrum allocation, under the automatic route.
Successful bidders of 3G auction were also permitted to make the payment for spectrum allocation initially out of rupee resources to be refinanced with a long-term ECB under the approval route.