Giving some sigh of relief to the government and the telcos, the Reserve Bank of India (RBI) has relaxed overseas borrowing rules for successful bidders in the recently concluded airwaves auction, making it easier for them to raise money to pay the government.
RBI in its notification said that â€œThe successful bidders making the upfront payment for the award of 2G spectrum initially out of rupee loans availed of from the domestic lenders would be eligible to refinance such rupee loans with a long-term ECB, under the automatic route,â€ also without seeking regulatory approval.
The telecom companies can further replace these short-term borrowings with long-term external (or overseas) commercial borrowings (ECB), provided the ECB is raised within a period of 18 months from the drawdown of the bridge finance.
RBI has also allowed the mobile operators to borrow from their parent companies without any limit, provided the parent owns a minimum 25 percent equity in the local company.
In the recently concluded auction the government got a lukewarm response from the operators for 1800 MHz band and received total bids worth Rs 9,407.64 crore, just one-third of the minimum Rs 28,000 crore that the government had expected. Five companies, Telenor, Vodafone, Idea Cellular, Videocon Telecommunications and Bharti Airtel bought airwaves in the recent auction. These companies are required to pay by December 1 or in installments. The RBI's move seems to have been taken after most of the bidders opted to pay the money in installments despite having to pay a higher interest rate compared to the ECB route.