RBI extends ECB borrowing window for airlines

The Reserve Bank of India (RBI) has extended the deadline for aviation sector to raise funds through external commercial borrowings (ECBs) route till March 2015.

The move is expected to provide relief to the cash-crunched sector.

"On a review, it has been decided that this scheme of raising ECB for working capital for Civil Aviation Sector will continue till March 31, 2015," RBI said in a notification on Wednesday. According to the earlier guidelines, the scheme was valid till December 31, 2013.

The overall ECB ceiling for the entire civil aviation sector would be $1 billion and the maximum permissible ECB that can be availed by an individual airline company will be $300 million, it said.

This limit can be utilised for working capital as well as refinancing of the outstanding working capital Rupee loan availed of from the domestic banking system, the RBI notification said.

Airline companies registered under the Companies Act, 1956 and possessing scheduled operator permit licence from Directorate General of Civil Aviation for passenger transportation are eligible to avail ECBs for working capital needs.

ECB for working capital, it said, should be raised within 12 months from the date of issue of the circular.

"ECB can be raised with a minimum average maturity period of three years," RBI notification added.

ECB, it added, will be allowed to the airline companies based on the cash flow, foreign exchange earnings and its capability to service the debt.