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RBI allows bidders for stressed assets to borrow overseas
Photo Credit: VCCircle

The Reserve Bank of India (RBI) on Thursday allowed access to overseas or external commercial borrowings (ECBs) for the bankruptcy resolution of firms.

To access the funds, bidders must obtain prior approval from the RBI, which will issue guidelines in this regard by the end of February.

Edelweiss ARC chairman Siby Antony said the RBI move will increase funding opportunities for private equity players and strategic investors. He added that until now only a few banks were offering finance for assets facing bankruptcy proceedings.

A chief executive of a large foreign private equity fund said that, because of the move, stronger players will be able to raise cheaper funds abroad, enabling them to bid at slightly higher prices.

State Bank of India (SBI) chairman Rajnish Kumar said that the RBI's move could facilitate a faster turnaround and earlier bankruptcy resolution. Punjab National Bank MD and CEO Sunil Mehta, who is also chairman of Indian Banks' Association, echoed the SBI chairman.

Nilang Desai, partner at law firm AZB & Partners, said the RBI move broadens the capital landscape, increasing the likelihood of more bidders in the bankruptcy resolution process and, hence, higher payouts for lenders of insolvent firms.

Separately, on the same day, the RBI unexpectedly lowered interest rates and, as anticipated, shifted its stance to "neutral" from "calibrated tightening".

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