ECB – Change in the Definition of Benchmark Rate & All-in-Cost Ceiling

The RBI Notification dated 8th December 2021:

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Circular date

08.12.2021

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Subject

External Commercial Borrowings (ECB) – Changes due to LIBOR transition

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Effective date

08.12.2021

 

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Applicability

All entities availing ECB and Trade Credits.

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Brief description

In view of the imminent discontinuance of LIBOR as a benchmark rate, following changes have been made by Reserve Bank of India (RBI) in ECB provisions:

Definition of Benchmarking:  Previously, the benchmark rate was defined as “benchmark rate in case of FCY ECB/TC refers to 6-months LIBOR rate of different currencies or any other 6-month interbank interest rate applicable to the currency of borrowing, e.g., EURIBOR”. Henceforth, benchmark rate in case of FCY ECB/TC shall refer to any widely accepted interbank rate or alternative reference rate (ARR) of 6-month tenor, applicable to the currency of borrowing.

All-in-cost ceiling for new ECB: Increased by 50 bps i.e.  Benchmark rate plus 500 bps spread.

All-in-cost ceiling for existing ECB linked to LIBOR whose benchmarks are changed to ARR: Increased by 100 bps i.e.  Benchmark rate plus 550 bps spread.

All-in-cost ceiling for new Trade Credit: Increased by 50 bps i.e.  Benchmark rate plus 300 bps spread.

All-in-cost ceiling for existing Trade Credit linked to LIBOR whose benchmarks are changed to ARR: Increased by 100 bps i.e.  Benchmark rate plus 350 bps spread.

There is no change in the all-in-cost benchmark and ceiling for INR ECBs/ TCs

Complete circulars attached

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