The Reserve Bank of India (RBI) has given RIL (Reliance Industries Limited), the largest firm in the nation by market value, permission to keep $2 billion in addition to the $3 billion it raised in the previous fiscal year under the largest syndicated credit facility in years.

According to three people acquainted with the transaction, central bank clearance was required because the sum collected exceeded Mint Road’s established thresholds. According to business leaders who are aware of the arrangements, Reliance intends to use the funds to build its new energy and telecom companies as well as to cover working capital needs.

“Banks from all over the world were interested in taking part in the loan exercise back in March because of Reliance’s outstanding credit rating and cash flows. The company decided to keep more than it required because there was still money available from banks after two rounds of syndication due to the loan’s high demand, according to the first of the three sources mentioned above. This is not the first time the Reserve Bank of India has approved a similar hike. Reliance had previously asked the RBI for a special permit.

Reliance and the banking regulator’s spokespersons did not reply to emails from ET asking about the situation.

At least ten other lenders will join the third leg of the $3 billion loan syndication to Reliance and Reliance Jio Infocomm, as ET reported in its March 13 issue.

Case-by-case approvals are given.

One of the most sought-after loan agreements in recent times in India was said to be this one. At the end of March, that loan syndication, in which more than thirty institutions took part, was finished.

“The corporation requested the RBI keep the additional $2 billion above and above the $3 billion it had hoped to raise the previous year. These clearances are given on a case-by-case basis because the company must present a strong business case to raise this amount of money, according to a second source familiar with the deal. The corporation will withdraw the additional funds later this month as a result of this month’s approvals.

Present ceiling

Undoubtedly, the external commercial borrowings (ECB) rules of the central bank limit a person’s exposure to $750 million annually. Beyond this threshold, businesses must get special clearance from the RBI in order to raise money overseas.

The loan, a five-year ECB, represents an Indian corporate house’s greatest use of syndicated term loans in at least five years. The syndication included banks from the UK, the US, and India, as well as South Korea, Taiwan, and Mauritius.

According to a report in ET’s October 10, 2022 edition, the loan proceeds were set aside to pay for capital expenditures by Reliance Industries and the growth of Jio’s 5G network. 150 basis points, or 1.5 percentage points, more than Reliance’s Secured Overnight Financing Rate (SOFR), is how much the loans are priced. According to a third individual familiar with the transaction, Jio’s spread is slightly wider than the market average (158 basis points).

The oil-to-telecom company is also attempting to secure a new $2 billion loan while it completes the drawdown of the loan that it started last fiscal year.