Enhanced all-in-cost ceiling for ECBs extended till Dec 2014

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The enhanced all-in-cost ceiling for external commercial borrowings has been extended till December, 2014.

"On a review, it has been decided that the all-in-cost ceiling for external commercial borrowings (ECBs) will continue to be applicable till December 31, 2014 and is subject to review thereafter," an RBI circular has said.

The ceiling had expired on June 30, 2014.

All-in-cost ceiling involves every cost in a financial transaction. By comparing all-in costs, borrowers can compare net gain potential.

It helps them understand true cost of loans, including closing costs and interest, and to evaluate both their ability to pay it off and whether the borrowing is worth that expense.

The all-in-cost ceiling includes arranger fee, upfront fee, management fee, handling/processing charges, out of pocket and legal expenses.

On November 23, 2011, RBI had revised the all-in-cost ceiling for ECBs in view of global financial markets and on the fact borrowers were experiencing difficulties in raising ECBs within existing all-in-cost ceiling.

Since, then it has been extended from time to time.

The all-in-cost ceiling for ECBs with average maturity of three and up to five years was enhanced to 6 months Libor + 350 bps (one bps is 0.01 per cent) from earlier limit of 6 months Libor + 300 bps.

LIBOR is a benchmark rate that leading banks charge each other for short-term loans.


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