The Reserve Bank of India (RBI) has extended the deadline for aviation sector to raise the funds through external commercial borrowings (ECB) for working capital requirements till March 2015.
Overseas borrowings are cheaper and help loss-making firms cut their cost of operations. As per the earlier guidelines issued by RBI, the scheme was valid till December 31, 2013.
This is the second time that RBI has extended the date after introducing it on April 24, 2012.
All airline companies which are registered under the Companies Act, 1956 and possess scheduled operator permit licence from Directorate General of Civil Aviation for passenger transportation, can raise money via ECBs. It’s allowed based on the cash flow, foreign exchange earnings and the airlines’ capability to service debt.
The companies can use the money for refinancing of the outstanding working capital rupee loan availed from the domestic banking system besides using for fresh working capital requirement.
An individual airline company is allowed to raise up to $300 million through ECB and the entire civil aviation sector can raise up to $1 billion.
(Edited by Joby Puthuparampil Johnson)