The Reserve Bank of India (“RBI”) on Wednesday 22 July, 2010 issued a circular permitting refinancing under a Take-out Finance Scheme (“Scheme”). Under the existing External Commercial Borrowings (“ECB”) policy, borrowers were not allowed to refinance their existing domestic loans with foreign currency loans. The RBI has now permitted this under certain specified conditions. Takeout financing will now be permitted as an ECB under the approval route for refinancing rupee loans availed from domestic banks in connection with projects in a limited number of infrastructure sectors.

Takeout Financing has been seen as necessary prerequisite for the development of infrastructure ...