INDIA Trends and Developments Contributed by: Tirthankar Datta, JSA Advocates & Solicitors
• Separately from strategic acquisition finance, the Draft CME Directions recognise bridge finance as a short-term credit facility extended for legitimate business purposes, including funding promoters’ stake in new ventures, where the borrower has a clear and credible plan to refinance within one year through equity, debt or similar instruments. The Draft CME Directions attempt to balance inter - est by liberalising the acquisition financing space for banks, making them active participants while ensur - ing risk mitigation. In the long term, this step by the RBI will broaden the funding eco-system for eligible acquirers, which currently rely primarily on non-bank - ing financing companies, private credit funds, alterna - tive investment funds, etc, while making sure the pric - ing of such acquisitions is done at a more competitive rate across the lending sphere. While the Draft CME Directions do not directly impact the non-bank private credit market, private credit financings will definitely face competition if these liberalisations see the light of day in some manner. However, there are some key conditionalities attached that will result in acquisition financing by banks being available to a limited sub-set of borrowers only. Radical changes to the ECB regulations in the works Lending by foreign banks and other non-resident enti - ties in foreign currency under the existing external commercial borrowing (ECB) regulations have been shackled with all-in-cost ceilings, minimum maturity requirements and annual limits to borrowing under the automatic route (ie, without requiring any RBI approval). In a surprise move, the RBI has drafted an amendment to the ECB regulations, seeking to imple - ment the following. • Increase ECB limits up to USD1 billion or 300% of the net worth, whichever is higher). No limits are applicable on regulated entities. • The cost of borrowing is proposed to be brought in line with market conditions, subject to the satisfac - tion of the Authorised Dealer Bank. • A uniform minimum average maturity period of three years for all ECBs, other than for borrowers in the manufacturing sector for an ECB up to USD50
million, which may be between one and three years. The draft framework materially liberalises access to offshore funding by raising borrowing limits, mov - ing to market-based pricing, enhancing the annual borrowing limits (and eliminating them altogether for regulated entities such as NBFCs) and easing tenor constraints for manufacturing borrowers, which can reduce funding costs and improve flexibility for Indian corporates. RBI consolidation exercise The RBI has been regulating various financial services and administering foreign exchange control regula - tions through a web of complex directions and cir - culars issued from time to time, but has embarked on a simplification exercise by consolidating various directions and circulars into comprehensive Master Directions split into circulars for each type of regulated entity. This approach reduces interpretational ambi - guity and enhances the ease of doing business by reducing regulatory complexity. Bond market reforms In FY25, India’s corporate bond market saw a record INR9.9 trillion in fresh issuances, raising net outstand - ing debt to INR53.6 trillion, with AAA-rated and listed private placements dominating. However, SEBI and the RBI have continued to reform bond market regu - lations, in order to deepen the debt capital markets. In August 2025, the RBI permitted partial credit enhancement up to 50% of the bond issue size for corporate/SPV project bonds and bonds issued by NBFCs (INR1,000 crore asset size), with some guard rails like a minimum pre-enhancement credit rating of BBB- or higher by two credit rating agencies. In addition, to ease the burden on high-value debt- listed entities (HVDLE) that need to comply with higher corporate governance requirements, SEBI has increased the threshold for identifying HVDLE, from INR500 crore to INR1,000 crore. In its latest board meeting, SEBI approved a further increase of the threshold, from INR1,000 crore outstanding NCDs to INR5,000 crore outstanding NCDs. Raising the HVDLE threshold reduces compliance friction for mid-sized
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