RBI permits interbank rate or alternative reference rate for External Commercial Borrowings & Trade Credits

Circular no. DOR.CAP.REC. No.72/21.06.201/2021-22, Dated: 8-12-2021

In view of the imminent discontinuance of LIBOR as a benchmark rate, the RBI has decided, in consultation with stakeholders, to take into account differences in credit risk and term premia between LIBOR and the ARRs, the all-in-cost ceiling for new FCY ECBs and TCs has been increased by 50 bps to 500 bps and 300 bps, respectively, over the benchmark rates. There is no change in the all-in-cost benchmark and ceiling for INR ECBs/ TCs.

To enable the smooth transition of existing ECBs/ TCs linked to LIBOR whose benchmarks are changed to ARRs, the all-in-cost ceiling for such ECBs/ TCs has been revised upwards by 100 basis points to 550 bps and 350 bps, respectively, over the ARR.

AD Category-I banks must ensure that any such revision in the ceiling is only on account of the transition from LIBOR to alternative benchmarks.

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